ITEM 1. FINANCIAL STATEMENTS
METALDYNE PERFORMANCE GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions except per share data)
|
|
October 2,
2016
|
|
|
December 31,
2015
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
151.1
|
|
|
|
168.2
|
|
Receivables, net:
|
|
|
|
|
|
|
|
|
Trade
|
|
|
378.9
|
|
|
|
309.1
|
|
Other
|
|
|
35.1
|
|
|
|
35.4
|
|
Total receivables, net
|
|
|
414.0
|
|
|
|
344.5
|
|
Inventories
|
|
|
173.8
|
|
|
|
186.8
|
|
Prepaid expenses
|
|
|
14.1
|
|
|
|
15.0
|
|
Other assets
|
|
|
28.1
|
|
|
|
21.5
|
|
Total current assets
|
|
|
781.1
|
|
|
|
736.0
|
|
Property and equipment, net
|
|
|
818.4
|
|
|
|
786.0
|
|
Goodwill
|
|
|
907.7
|
|
|
|
907.7
|
|
Amortizable intangible assets, net
|
|
|
656.6
|
|
|
|
708.9
|
|
Deferred income taxes
|
|
|
5.7
|
|
|
|
1.7
|
|
Other assets
|
|
|
16.2
|
|
|
|
17.3
|
|
Total assets
|
|
$
|
3,185.7
|
|
|
|
3,157.6
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
245.4
|
|
|
|
248.9
|
|
Accrued compensation
|
|
|
52.9
|
|
|
|
55.2
|
|
Accrued liabilities
|
|
|
78.8
|
|
|
|
66.8
|
|
Short-term debt
|
|
|
0.4
|
|
|
|
0.7
|
|
Current maturities, long-term debt and capital lease obligations
|
|
|
13.4
|
|
|
|
14.5
|
|
Total current liabilities
|
|
|
390.9
|
|
|
|
386.1
|
|
Long-term debt, less current maturities
|
|
|
1,827.2
|
|
|
|
1,827.1
|
|
Capital lease obligations, less current maturities
|
|
|
22.7
|
|
|
|
22.5
|
|
Deferred income taxes
|
|
|
205.1
|
|
|
|
231.3
|
|
Other long-term liabilities
|
|
|
52.8
|
|
|
|
51.6
|
|
Total liabilities
|
|
|
2,498.7
|
|
|
|
2,518.6
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Common Stock: par $0.001, 400.0 authorized, 66.9 and 67.9 shares issued and
outstanding, respectively
|
|
|
0.1
|
|
|
|
0.1
|
|
Common stock held in treasury, at cost: 1.7 and zero shares, respectively
|
|
|
(25.8
|
)
|
|
|
—
|
|
Paid-in capital
|
|
|
870.0
|
|
|
|
856.2
|
|
Deficit
|
|
|
(102.2
|
)
|
|
|
(162.9
|
)
|
Accumulated other comprehensive loss
|
|
|
(58.4
|
)
|
|
|
(57.3
|
)
|
Total equity attributable to stockholders
|
|
|
683.7
|
|
|
|
636.1
|
|
Noncontrolling interest
|
|
|
3.3
|
|
|
|
2.9
|
|
Total stockholders’ equity
|
|
|
687.0
|
|
|
|
639.0
|
|
Total liabilities and stockholders’ equity
|
|
$
|
3,185.7
|
|
|
|
3,157.6
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
1
METALDYNE PERFORMANCE GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions except per share data)
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
October 2,
2016
|
|
|
September 27,
2015
|
|
|
October 2,
2016
|
|
|
September 27,
2015
|
|
Net sales
|
|
$
|
676.2
|
|
|
|
746.6
|
|
|
$
|
2,144.1
|
|
|
|
2,312.0
|
|
Cost of sales
|
|
|
569.8
|
|
|
|
620.4
|
|
|
|
1,770.9
|
|
|
|
1,915.2
|
|
Gross profit
|
|
|
106.4
|
|
|
|
126.2
|
|
|
|
373.2
|
|
|
|
396.8
|
|
Selling, general and administrative expenses
|
|
|
56.2
|
|
|
|
64.8
|
|
|
|
177.0
|
|
|
|
178.8
|
|
Operating income
|
|
|
50.2
|
|
|
|
61.4
|
|
|
|
196.2
|
|
|
|
218.0
|
|
Interest expense, net
|
|
|
25.7
|
|
|
|
26.0
|
|
|
|
78.1
|
|
|
|
80.5
|
|
Loss on debt extinguishment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.4
|
|
Other, net
|
|
|
2.0
|
|
|
|
(1.7
|
)
|
|
|
10.7
|
|
|
|
(8.2
|
)
|
Other expense, net
|
|
|
27.7
|
|
|
|
24.3
|
|
|
|
88.8
|
|
|
|
72.7
|
|
Income before tax
|
|
|
22.5
|
|
|
|
37.1
|
|
|
|
107.4
|
|
|
|
145.3
|
|
Income tax expense
|
|
|
3.1
|
|
|
|
8.8
|
|
|
|
27.3
|
|
|
|
40.3
|
|
Net income
|
|
|
19.4
|
|
|
|
28.3
|
|
|
|
80.1
|
|
|
|
105.0
|
|
Income attributable to noncontrolling interest
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.4
|
|
|
|
0.3
|
|
Net income attributable to stockholders
|
|
$
|
19.3
|
|
|
|
28.2
|
|
|
$
|
79.7
|
|
|
|
104.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - Basic
|
|
|
67.2
|
|
|
|
67.3
|
|
|
|
67.6
|
|
|
|
67.2
|
|
Weighted average shares outstanding - Diluted
|
|
|
69.2
|
|
|
|
69.0
|
|
|
|
69.2
|
|
|
|
69.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
0.0925
|
|
|
|
0.0900
|
|
|
$
|
0.2750
|
|
|
|
0.1800
|
|
Net income per share attributable to stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.29
|
|
|
|
0.42
|
|
|
$
|
1.18
|
|
|
|
1.56
|
|
Diluted
|
|
|
0.28
|
|
|
|
0.41
|
|
|
|
1.15
|
|
|
|
1.52
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
2
METALDYNE PERFORMANCE GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
October 2,
2016
|
|
|
September 27,
2015
|
|
|
October 2,
2016
|
|
|
September 27,
2015
|
|
Net income
|
|
$
|
19.4
|
|
|
|
28.3
|
|
|
$
|
80.1
|
|
|
|
105.0
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
0.5
|
|
|
|
(8.3
|
)
|
|
|
(1.1
|
)
|
|
|
(20.1
|
)
|
Other comprehensive income (loss), net of tax
|
|
|
0.5
|
|
|
|
(8.3
|
)
|
|
|
(1.1
|
)
|
|
|
(20.1
|
)
|
Comprehensive income
|
|
|
19.9
|
|
|
|
20.0
|
|
|
|
79.0
|
|
|
|
84.9
|
|
Less comprehensive income attributable to noncontrolling interest
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.4
|
|
|
|
0.3
|
|
Comprehensive income attributable to stockholders
|
|
$
|
19.8
|
|
|
|
19.9
|
|
|
$
|
78.6
|
|
|
|
84.6
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
3
METALDYNE PERFORMANCE GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY
(In millions)
|
|
Common
stock
|
|
|
Common stock held in treasury
|
|
|
Paid-in
capital
|
|
|
Accumulated deficit
|
|
|
Accumulated
other
comprehensive
loss
|
|
|
Noncontrolling
interest
|
|
|
Total
stockholders’
equity
|
|
Balance, December 31, 2014
|
|
$
|
0.1
|
|
|
|
—
|
|
|
|
827.3
|
|
|
|
(269.7
|
)
|
|
|
(35.2
|
)
|
|
|
2.5
|
|
|
|
525.0
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(12.3
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
15.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.4
|
|
Cash settlement of equity awards
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.5
|
|
Excess tax benefit on stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.8
|
|
Offering-related costs
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104.7
|
|
|
|
|
|
|
|
0.3
|
|
|
|
105.0
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20.1
|
)
|
|
|
|
|
|
|
(20.1
|
)
|
Reclassifications, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
0.2
|
|
Balance, September 27, 2015
|
|
$
|
0.1
|
|
|
|
—
|
|
|
|
846.2
|
|
|
|
(177.3
|
)
|
|
|
(55.1
|
)
|
|
|
2.8
|
|
|
|
616.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
$
|
0.1
|
|
|
|
—
|
|
|
|
856.2
|
|
|
|
(162.9
|
)
|
|
|
(57.3
|
)
|
|
|
2.9
|
|
|
|
639.0
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19.0
|
)
|
|
|
|
|
|
|
|
|
|
|
(19.0
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
12.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.6
|
|
Cash settlement of equity awards
|
|
|
|
|
|
|
|
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.5
|
)
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.8
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
(25.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25.8
|
)
|
Excess tax benefit on stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.9
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79.7
|
|
|
|
|
|
|
|
0.4
|
|
|
|
80.1
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
(1.1
|
)
|
Balance, October 2, 2016
|
|
$
|
0.1
|
|
|
|
(25.8
|
)
|
|
|
870.0
|
|
|
|
(102.2
|
)
|
|
|
(58.4
|
)
|
|
|
3.3
|
|
|
|
687.0
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
4
METALDYNE PERFORMANCE GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
|
|
Nine Months Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
80.1
|
|
|
|
105.0
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
165.6
|
|
|
|
172.1
|
|
Debt fee amortization
|
|
|
2.5
|
|
|
|
2.4
|
|
Loss on fixed asset dispositions
|
|
|
2.6
|
|
|
|
1.9
|
|
Deferred income taxes
|
|
|
(30.2
|
)
|
|
|
(25.9
|
)
|
Noncash interest expense
|
|
|
0.8
|
|
|
|
0.8
|
|
Stock-based compensation expense
|
|
|
12.6
|
|
|
|
15.4
|
|
Foreign currency adjustment
|
|
|
7.6
|
|
|
|
(3.6
|
)
|
Other
|
|
|
1.5
|
|
|
|
5.4
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
(62.5
|
)
|
|
|
(78.3
|
)
|
Inventories
|
|
|
14.2
|
|
|
|
9.8
|
|
Accounts payable, accrued liabilities, and accrued compensation
|
|
|
5.9
|
|
|
|
11.2
|
|
Other, current
|
|
|
(4.2
|
)
|
|
|
(0.7
|
)
|
Other, non-current
|
|
|
(0.1
|
)
|
|
|
(3.9
|
)
|
Net cash provided by operating activities
|
|
|
196.4
|
|
|
|
211.6
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(145.4
|
)
|
|
|
(168.7
|
)
|
Proceeds from sale of fixed assets
|
|
|
0.2
|
|
|
|
3.8
|
|
Capitalized patent costs
|
|
|
(0.2
|
)
|
|
|
(0.3
|
)
|
Acquisition of business, net of cash acquired
|
|
|
(14.0
|
)
|
|
|
—
|
|
Net cash used for investing activities
|
|
|
(159.4
|
)
|
|
|
(165.2
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Cash dividends
|
|
|
(18.7
|
)
|
|
|
(12.1
|
)
|
Proceeds from stock issuance
|
|
|
1.8
|
|
|
|
2.5
|
|
Purchases of treasury stock
|
|
|
(25.6
|
)
|
|
|
—
|
|
Excess tax benefit on stock-based compensation
|
|
|
0.9
|
|
|
|
1.8
|
|
Cash settlement of equity awards
|
|
|
(1.5
|
)
|
|
|
(0.7
|
)
|
Borrowings of revolving lines of credit
|
|
|
—
|
|
|
|
14.3
|
|
Payments of revolving lines of credit
|
|
|
—
|
|
|
|
(14.6
|
)
|
Proceeds of long-term debt
|
|
|
—
|
|
|
|
1,326.6
|
|
Payments of long-term debt
|
|
|
(10.0
|
)
|
|
|
(1,385.2
|
)
|
Payment of debt issuance costs
|
|
|
—
|
|
|
|
(0.1
|
)
|
Other debt, net
|
|
|
(1.8
|
)
|
|
|
(1.9
|
)
|
Payment of offering related costs
|
|
|
—
|
|
|
|
(0.1
|
)
|
Net cash used for financing activities
|
|
|
(54.9
|
)
|
|
|
(69.5
|
)
|
Effect of exchange rates on cash
|
|
|
0.8
|
|
|
|
(8.8
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(17.1
|
)
|
|
|
(31.9
|
)
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
168.2
|
|
|
|
156.5
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(17.1
|
)
|
|
|
(31.9
|
)
|
Cash and cash equivalents, end of period
|
|
$
|
151.1
|
|
|
|
124.6
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes, net
|
|
$
|
55.9
|
|
|
|
49.2
|
|
Cash paid for interest
|
|
|
63.5
|
|
|
|
66.1
|
|
Noncash transactions:
|
|
|
|
|
|
|
|
|
Capital expenditures in accounts payables
|
|
|
16.8
|
|
|
|
16.5
|
|
Dividends declared on restricted stock awards not yet vested
|
|
|
0.5
|
|
|
|
0.2
|
|
Purchase of treasury stock not yet settled
|
|
|
0.2
|
|
|
|
0.2
|
|
See accompanying notes to unaudited condensed consolidated financial statements.
5
METALDYNE PERFORMANCE GROUP INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization
Metaldyne Performance Group Inc. is a leading provider of components for use in engine, transmission and driveline (“Powertrain”) and chassis, suspension, steering and brake component (“Safety-Critical”) applications for the global light, commercial and industrial vehicle markets. We produce these components using complex metal-forming manufacturing technologies and processes for a global customer base of vehicle original equipment manufacturers (“OEMs”) and tier 1 suppliers. Our components help OEMs meet fuel economy, performance and safety standards. Our metal-forming manufacturing technologies and processes include aluminum casting, cold, warm or hot forging, iron casting, and powder metal forming, as well as value-added precision machining and assembly. These technologies and processes are used to create a wide range of customized Powertrain and Safety-Critical components that address requirements for power density (increased component strength to weight ratio), power generation, power/torque transfers, strength and noise, vibration and harshness.
(2) Accounting Policies
Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by Metaldyne Performance Group Inc. (the “Company”, “MPG”, “we”, “our”, or “its”) in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the financial position as of October 2, 2016 and the results of operations and comprehensive income for the quarters and nine months ended October 2, 2016 and September 27, 2015, and statements of cash flows and stockholders’ equity for the nine months ended October 2, 2016 and September 27, 2015. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.
The condensed consolidated balance sheet as of December 31, 2015 was derived from our audited financial statements. The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Use of significant estimates and judgments are inherent in the accounting for acquisitions, stock-based compensation, income taxes and employee benefit plans, as
well as in the testing of goodwill and long-lived assets for potential impairment. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.
(3) Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This guidance will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The guidance, as agreed to by the FASB, is effective for the interim and annual periods beginning on or after December 15, 2017. Early adoption is permitted on January 1, 2017. The guidance permits the use of either a retrospective or cumulative effect transition method. We have not yet selected a transition method and are currently evaluating the impact this guidance will have on the consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The primary focus of the standard addresses the accounting of lessees. It requires all lessees to recognize a right-of-use asset and a lease liability for virtually all leases (other than leases that meet the definition of a short-term lease) on the balance sheet. The recognition, measurement and presentation of expenses
6
and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. O
perating leases will result in straight-line expense while finance leases will result in depreciation expense recorded on the right-of-use asset and interest expense recorded on the lease liability. Quantitative and qualitative disclosures are required to
provide insight into the extent of revenue and expense recognized and expected to be recognized from leasing arrangements. This guidance becomes effective January 1, 2019. Early adoption is permitted. We are currently evaluating the impact this guidance wi
ll have on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815), Contingent Put and Call Options in Debt Instruments. This guidance clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendments in this ASU require a four-step decision sequence when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We did not early adopt this guidance for the quarter and nine months ended October 2, 2016. However, we do not expect adoption of this ASU to impact the consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718). This guidance updates several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Specific changes include that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity would also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits would be classified along with other income tax cash flows as an operating activity. Also, an entity can make an accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. This ASU also amends guidance for the calculation of earnings per share under the treasury stock method by removing excess tax benefits as an assumed proceed from the exercise of options. This guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. We did not early adopt this guidance for the quarter and nine months ended October 2, 2016, and are currently evaluating the impact on the consolidated financial statements.
(4) Recently Adopted Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Topic 835-30). This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. This guidance is effective for fiscal years and interim periods beginning after December 15, 2015, and requires retrospective application. We adopted this guidance during the quarter ended April 3, 2016. Unamortized debt issuance costs associated with our long-term debt totaled $17.7 million and $19.6 million as of October 2, 2016 and December 31, 2015, respectively, and are classified within long-term debt on the condensed consolidated balance sheets. The adoption of this standard had no impact on the Company’s condensed consolidated statements of operations, comprehensive income, stockholders’ equity, or cash flows.
(5) Brillion Acquisition
On September 2, 2016, the Grede segment acquired 100% of the equity of Brillion Iron Works, Inc. (“Brillion”) from its parent company Accuride Corporation (NYSE: ACW). Brillion was a reportable segment for Accuride Corporation and consists of a foundry located in Brillion, Wisconsin, (the “Brillion Facility”) which supplies castings to the industrial machinery, construction, agricultural equipment and oil and gas markets, including flywheels, pump housings, valve body housings, small engine components, and other industrial components.
The purchase price for the acquisition was $14.0 million of cash consideration. Under the acquisition method of accounting, all assets acquired and liabilities assumed were recorded in the financial statements at estimated fair value. The allocation of purchase price paid resulted in receivables of $8.1 million, inventory of $3.8 million, property, plant, and equipment of $15.9 million, assumed liabilities of $12.8 million, and a gain on bargain purchase of $1.0 million. The $1.0 million gain on bargain purchase is recorded within other, net on the condensed consolidated statement of operations for the quarter and nine months ended October 2, 2016.
Brillion net sales and loss before tax included in the condensed consolidated statement of operations for the quarter and nine months ended October 2, 2016 were $4.4 million and $0.4 million, respectively. Total MPG net sales and income before tax on a pro
7
forma
basis as if the Brillion Acquisition had occurred on January 1, 2016 were $688.8 million and $18.5 million, and $2,189.7 million and $97.2 million for the quarter and nine months ended October 2, 2016, respectively.
On September 12, 2016, the Company announced its plan to close the Brillion Facility by the end of 2016 and to consolidate substantially all of Brillion’s business into existing Grede locations.
(6) Receivables Allowances
Receivables were stated net of the following allowances:
|
|
October 2, 2016
|
|
|
December 31,
2015
|
|
|
|
(In millions)
|
|
Doubtful accounts
|
|
$
|
2.1
|
|
|
|
1.4
|
|
Pricing accruals and anticipated customer deductions
|
|
|
6.2
|
|
|
|
8.1
|
|
Returns
|
|
|
2.5
|
|
|
|
2.0
|
|
|
|
$
|
10.8
|
|
|
|
11.5
|
|
(7) Inventories
Inventories were as follows:
|
|
October 2, 2016
|
|
|
December 31,
2015
|
|
|
|
(In millions)
|
|
Raw materials
|
|
$
|
53.1
|
|
|
|
57.3
|
|
Work in process
|
|
|
68.4
|
|
|
|
66.3
|
|
Finished goods
|
|
|
52.3
|
|
|
|
63.2
|
|
Total inventories
|
|
$
|
173.8
|
|
|
|
186.8
|
|
(8) Property and Equipment, Net
Accumulated depreciation as of October 2, 2016 and December 31, 2015 was $527.0 million and $419.6 million, respectively.
In May 2016, the Company announced plans to close its Bessemer, Alabama facility included within the Grede segment. The closure, which is primarily due to declines in heavy truck and industrial equipment markets, is expected to be completed by the end of fiscal 2016. The Company recorded a $2.3 million asset impairment charge within
cost of sales
for the three months ended July 3, 2016 in conjunction with this announcement.
(9) Amortizable Intangible Assets
The carrying amounts and accumulated amortization of intangible assets were as follows:
|
|
October 2, 2016
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
|
(In millions)
|
|
Customer relationships and platforms
|
|
$
|
745.2
|
|
|
|
(182.3
|
)
|
|
|
562.9
|
|
Other
|
|
|
126.9
|
|
|
|
(33.2
|
)
|
|
|
93.7
|
|
Total
|
|
$
|
872.1
|
|
|
|
(215.5
|
)
|
|
|
656.6
|
|
8
|
|
December 31, 2015
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
|
(In millions)
|
|
Customer relationships and platforms
|
|
$
|
745.2
|
|
|
|
(137.0
|
)
|
|
|
608.2
|
|
Other
|
|
|
126.7
|
|
|
|
(26.0
|
)
|
|
|
100.7
|
|
Total
|
|
$
|
871.9
|
|
|
|
(163.0
|
)
|
|
|
708.9
|
|
(10) Debt
The carrying value of debt was as follows:
|
|
October 2, 2016
|
|
|
December 31, 2015
|
|
|
|
(In millions)
|
|
Short-term debt:
|
|
|
|
|
|
|
|
|
Revolving lines of credit
|
|
$
|
—
|
|
|
|
—
|
|
Other short-term debt
|
|
|
0.4
|
|
|
|
0.7
|
|
Total short-term debt
|
|
$
|
0.4
|
|
|
|
0.7
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
Term loans
|
|
|
|
|
|
|
|
|
USD Term Loan
|
|
$
|
1,014.2
|
|
|
|
1,022.2
|
|
Euro Term Loan
|
|
|
249.9
|
|
|
|
244.1
|
|
Registered Notes
|
|
|
600.0
|
|
|
|
600.0
|
|
Other long-term debt (various interest rates)
|
|
|
0.1
|
|
|
|
0.4
|
|
Total
|
|
|
1,864.2
|
|
|
|
1,866.7
|
|
Unamortized debt issuance costs
|
|
|
(17.7
|
)
|
|
|
(19.6
|
)
|
Unamortized discount on term loans
|
|
|
(6.0
|
)
|
|
|
(6.7
|
)
|
Current maturities
|
|
|
(13.3
|
)
|
|
|
(13.3
|
)
|
Total long-term debt
|
|
$
|
1,827.2
|
|
|
|
1,827.1
|
|
Debt Activity
Accrued interest of $27.8 million and $16.5 million as of October 2, 2016 and December 31, 2015 was reflected in
accrued liabilities
.
(11) Equity and Dividends
Dividends
Our board of directors declared and the Company paid the following dividends during the nine months ended October 2, 2016.
Date Declared
|
|
Date Paid
|
|
Dividend Per Share
|
|
|
|
|
|
|
|
|
February 24, 2016
|
|
April 26, 2016
|
|
$
|
0.0900
|
|
May 4, 2016
|
|
June 21, 2016
|
|
|
0.0925
|
|
August 3, 2016
|
|
September 20, 2016
|
|
|
0.0925
|
|
Share repurchases
On February 24, 2016, our board of directors authorized a share repurchase program (the “Share Repurchase Program”). The Share Repurchase Program, as amended on August 3, 2016, authorizes the Company to purchase shares of its common stock for an aggregate repurchase price not to exceed $35.0 million. Subject to applicable rules and regulations, the shares may be repurchased through open market purchases, privately negotiated transactions, or otherwise. The Share Repurchase Program expires in February 2017, and may be terminated or amended by the Company’s board of directors at any time. As of October 2, 2016, cumulative shares repurchased totaled 1,659,804 shares at an average purchase price per share of $15.55. The repurchased shares are presented as common stock held in treasury, at cost, on the condensed consolidated balance sheets.
9
Changes in Accumulated Other Comprehensive Loss, Net of Tax
|
|
Foreign Currency
Items
|
|
|
Defined Benefit
Items
|
|
|
Total
|
|
|
|
(In millions)
|
|
Balance, June 28, 2015
|
|
$
|
(39.5
|
)
|
|
|
(7.3
|
)
|
|
|
(46.8
|
)
|
Other comprehensive income (loss)
|
|
|
(8.3
|
)
|
|
|
—
|
|
|
|
(8.3
|
)
|
Balance, September 27, 2015
|
|
$
|
(47.8
|
)
|
|
|
(7.3
|
)
|
|
|
(55.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
$
|
(27.7
|
)
|
|
|
(7.5
|
)
|
|
|
(35.2
|
)
|
Other comprehensive income (loss)
|
|
|
(20.1
|
)
|
|
|
—
|
|
|
|
(20.1
|
)
|
Reclassifications, net
|
|
|
—
|
|
|
|
0.2
|
|
|
|
0.2
|
|
Balance, September 27, 2015
|
|
$
|
(47.8
|
)
|
|
|
(7.3
|
)
|
|
|
(55.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 3, 2016
|
|
$
|
(53.7
|
)
|
|
|
(5.2
|
)
|
|
|
(58.9
|
)
|
Other comprehensive income (loss)
|
|
|
0.5
|
|
|
|
—
|
|
|
|
0.5
|
|
Balance, October 2, 2016
|
|
$
|
(53.2
|
)
|
|
|
(5.2
|
)
|
|
|
(58.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
$
|
(52.0
|
)
|
|
|
(5.3
|
)
|
|
|
(57.3
|
)
|
Other comprehensive income (loss)
|
|
|
(1.2
|
)
|
|
|
0.1
|
|
|
|
(1.1
|
)
|
Balance, October 2, 2016
|
|
$
|
(53.2
|
)
|
|
|
(5.2
|
)
|
|
|
(58.4
|
)
|
(12) Other, net
Included within
other, net
are the following (income) and expense items:
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
Foreign currency losses (gains)
|
|
$
|
2.8
|
|
|
|
(2.8
|
)
|
|
$
|
8.1
|
|
|
|
(11.7
|
)
|
Debt transaction expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.7
|
|
Other
|
|
|
(0.8
|
)
|
|
|
1.1
|
|
|
|
2.6
|
|
|
|
1.8
|
|
Other, net
|
|
$
|
2.0
|
|
|
|
(1.7
|
)
|
|
$
|
10.7
|
|
|
|
(8.2
|
)
|
Foreign currency losses (gains) pertain to realized and unrealized losses (gains) on foreign currency denominated transactions with customers and suppliers, short-term intercompany balances with foreign subsidiaries, and the re-measurement of our Euro denominated term loan as of October 2, 2016.
(13) Stock-based Compensation
In August 2014, our board of directors approved an equity incentive plan (the “MPG Plan”) for officers, key employees and non-employees. The MPG Plan permits the grant of equity awards to purchase up to 5.9 million shares of MPG common stock. All awards granted on or after August 4, 2014 were issued under the MPG Plan.
Restricted Shares
In April, May, and September 2016, the Company granted restricted stock unit awards (“RSUs”) to certain employees and nonemployee directors.
The following table summarizes the terms of the RSUs:
Vesting Term
|
|
Number of
Units/Options
|
|
|
Weighted Average Grant-Date Fair Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
1/3 per year on grant-date anniversary
|
|
|
900
|
|
|
$
|
15.45
|
|
10
Restricted stock awards and RSUs (together, the “Restricted Shares”) issued under the MPG Plan are being expensed based on their
grant-date fair value on a straight-line basis over the requisite service period for the entire award. The grant-date fair values of the Restricted Shares were determined using the fair value of the Company’s common stock as of the grant date.
Changes in the number of Restricted Shares outstanding for the nine months ended October 2, 2016 were as follows:
|
|
Number of
Restricted
Shares
|
|
|
Weighted
Average
Grant-Date
Fair Value
|
|
|
Fair Value of Shares Vested
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
(In millions)
|
|
Balance, December 31, 2015
|
|
|
1,165
|
|
|
$
|
17.47
|
|
|
|
|
|
Granted
|
|
|
900
|
|
|
|
15.45
|
|
|
|
|
|
Vested
|
|
|
(297
|
)
|
|
|
18.18
|
|
|
$
|
4.8
|
|
Forfeited
|
|
|
(24
|
)
|
|
|
16.43
|
|
|
|
|
|
Balance, October 2, 2016
|
|
|
1,744
|
|
|
|
16.32
|
|
|
|
|
|
Options
In April and September 2016, the Company granted options to certain employees with the following terms:
Vesting Terms
|
|
Number of
Options
|
|
Weighted Average Exercise
Price
|
|
|
Contractual
Terms
|
|
|
(In thousands)
|
|
|
|
|
|
(In years)
|
1/3 per year on grant-date anniversary
|
|
741
|
|
$
|
15.46
|
|
|
10
|
The options are being expensed based on their weighted average grant-date fair value of $5.59 per option on a straight-line basis over the requisite service period for the entire award. The grant-date fair value of the options was determined using a Black-Scholes valuation model based on the following weighted average assumptions:
Exercise price
|
|
$
|
15.46
|
|
Expected term
|
|
6 years
|
|
Risk-free rate
|
|
|
1.4
|
%
|
Expected volatility
|
|
|
47.0
|
%
|
Expected dividend yield
|
|
|
2.3
|
%
|
Per share market value of MPG common stock
|
|
$
|
15.46
|
|
The risk-free rate was determined based on U.S. Treasury yield curves of securities matching the expected term of the awards. The expected term was determined using the simplified method as the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate an expected term. Expected volatility was estimated based on the Company’s historical volatility as well as the historical volatility of comparable companies within our industry. The expected dividend yield was determined based on the expected annual dividend amount divided by the common stock price as of the grant date.
Changes in the number of options outstanding for the nine months ended October 2, 2016 were as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
(In years)
|
|
|
(In millions)
|
|
Balance, December 31, 2015
|
|
|
6,269
|
|
|
$
|
11.58
|
|
|
|
7.6
|
|
|
$
|
45.5
|
|
Granted
|
|
|
741
|
|
|
|
15.46
|
|
|
|
9.7
|
|
|
|
|
|
Exercised
|
|
|
(492
|
)
|
|
|
3.61
|
|
|
|
6.0
|
|
|
|
5.0
|
|
Forfeited
|
|
|
(87
|
)
|
|
|
14.58
|
|
|
|
6.8
|
|
|
|
|
|
Balance, October 2, 2016
|
|
|
6,431
|
|
|
|
12.60
|
|
|
|
6.7
|
|
|
|
31.1
|
|
Options exercisable, October 2, 2016
|
|
|
3,473
|
|
|
|
12.29
|
|
|
|
5.8
|
|
|
|
18.9
|
|
11
Stock-based Compensation Expense
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
|
(In millions)
|
|
Restricted shares
|
|
$
|
2.6
|
|
|
|
2.7
|
|
|
$
|
7.3
|
|
|
|
6.0
|
|
Options
|
|
|
1.8
|
|
|
|
5.1
|
|
|
|
5.3
|
|
|
|
9.4
|
|
Total
|
|
$
|
4.4
|
|
|
|
7.8
|
|
|
$
|
12.6
|
|
|
|
15.4
|
|
Compensation expense associated with the outstanding stock-based awards was recognized within selling, general and administrative expense. Total unrecognized compensation cost related to non-vested awards as of October 2, 2016 was approximately $35.9 million, and is expected to be recognized ratably over the remaining vesting terms.
(14) Income Taxes
The Company is required to adjust its effective tax rate each quarter based upon its estimated annual effective tax rate. The Company must also record the tax impact of certain discrete, unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate.
Income tax expense for the quarter ended October 2, 2016 and September 27, 2015 was $3.1 million and $8.8 million, respectively. Income tax expense for the nine months ended October 2, 2016 and September 27, 2015 was $27.3 million and $40.3 million, respectively. The effective income tax rate for the quarter ended October 2, 2016 and September 27, 2015 was 13.6% and 23.7%, respectively. The effective income tax rate for the nine months ended October 2, 2016 and September 27, 2015 was 25.4% and 27.7%, respectively.
The effective income tax rate for the quarter and nine months ended October 2, 2016 decreased compared to prior year primarily due to a favorable geographic income mix in 2016 as compared to 2015, partially offset by the impact of discrete tax items. Income tax expense for the nine months period ended October 2, 2016 includes a discrete net tax benefit of $2.4 million, primarily as a result of a favorable court ruling in Spain. Income tax expense for the nine months period ended September 27, 2015 includes a discrete net tax benefit of $4.1 million, primarily relating to the enactment of Senate Bill 441 in the State of Indiana, eliminating the throwback rule for calculating state income tax expense.
The effective tax rate for periods ended October 2, 2016 and September 27, 2015 varies from statutory rates primarily due to income taxes on foreign earnings which are taxed at rates different from the U.S. statutory rate and other permanent items. Further, the Company’s current and future provision for income taxes may be impacted by the recognition of valuation allowances in certain countries.
(15) Retirement Plans
The net expense recognized for the Company’s defined benefit pension plans was $0.2 million and zero for the quarters ended October 2, 2016 and September 27, 2015, respectively, and $0.7 million and $0.8 million for the nine months ended October 2, 2016 and September 27, 2015, respectively.
(16) Commitments and Contingencies
Various claims, lawsuits and administrative proceedings are pending or threatened against the Company or its subsidiaries, covering a wide range of matters that arise in the ordinary course of the Company’s business activities, primarily with respect to commercial, environmental and occupational and employment matters. Commercial disputes vary in nature and have historically been resolved by negotiations between the parties. Although the outcome of any of these matters cannot be predicted with certainty, the Company does not believe that any of these proceedings or matters in which the Company is currently involved will have a material adverse effect on the Company’s results of operations, financial position or cash flows.
12
In addition, the Company is conducting remediation actions at certain of its facilities. A re
serve estimate for each environmental matter is established using standard engineering cost estimating techniques on an undiscounted basis. In determining such costs, consideration is given to the professional judgment of Company environmental engineers. T
he Company believes any liability that may result from the resolution of environmental matters for which sufficient information is available to support these cost estimates will not have a material adverse effect on the Company’s results of operations, fin
ancial position or cash flows. The Company cannot predict the effect of compliance with environmental laws and regulations with respect to unknown environmental matters on the Company’s results of operations, financial position or cash flows or the possibl
e effect of compliance with environmental requirements imposed in the future.
(17) Fair Value
|
|
October 2, 2016
|
|
|
December 31, 2015
|
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
|
(In millions)
|
|
Registered Notes
|
|
$
|
590.5
|
|
|
|
613.5
|
|
|
|
589.6
|
|
|
|
605.9
|
|
USD Term Loan
|
|
|
1,001.2
|
|
|
|
1,021.8
|
|
|
|
1,007.5
|
|
|
|
1,000.5
|
|
Euro Term Loan
|
|
|
248.7
|
|
|
|
250.2
|
|
|
|
242.9
|
|
|
|
243.2
|
|
The fair values of the registered notes and term loans were estimated using quoted market prices. As the markets for this debt are not active, the debt is categorized as Level 2 within the fair value hierarchy.
The fair value of the Company’s other financial instruments, cash and cash equivalents, revolving lines of credit and other long-term debt, are estimated to equal their carrying values due to their nature.
(18) Net Income per Share Attributable to Stockholders (“EPS”)
The Company’s basic and diluted EPS were calculated as follows:
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions, except
per share amounts)
|
|
Weighted-average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares
|
|
|
67.2
|
|
|
|
67.3
|
|
|
|
67.6
|
|
|
|
67.2
|
|
Equivalent shares for outstanding stock-based
compensation awards
|
|
|
2.0
|
|
|
|
1.7
|
|
|
|
1.6
|
|
|
|
1.8
|
|
Diluted shares
|
|
|
69.2
|
|
|
|
69.0
|
|
|
|
69.2
|
|
|
|
69.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income attributable to stockholders
|
|
$
|
19.3
|
|
|
|
28.2
|
|
|
$
|
79.7
|
|
|
|
104.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS attributable to stockholders
|
|
|
0.29
|
|
|
|
0.42
|
|
|
|
1.18
|
|
|
|
1.56
|
|
Diluted EPS attributable to stockholders
|
|
|
0.28
|
|
|
|
0.41
|
|
|
|
1.15
|
|
|
|
1.52
|
|
The number of equivalent shares excluded from the calculation as they were anti-dilutive was 0.1 million and 0.2 million for the quarter and nine months ended October 2, 2016, respectively, and 0.3 million and 0.1 million for the quarter and nine months ended September 27, 2015, respectively.
13
(19) Segment Information
The Company is organized and operated as three operating segments: the HHI segment, the Metaldyne segment and the Grede segment.
Segment information was as follows:
|
|
Quarter Ended October 2, 2016
|
|
|
|
External
Sales
|
|
|
Intersegment
Sales
|
|
|
Adjusted
EBITDA
|
|
|
Capital
Expenditures
|
|
|
Depreciation/
Amortization
|
|
|
|
(In millions)
|
|
HHI
|
|
$
|
204.7
|
|
|
|
1.9
|
|
|
|
39.5
|
|
|
|
12.9
|
|
|
|
19.8
|
|
Metaldyne
|
|
|
282.7
|
|
|
|
0.3
|
|
|
|
50.3
|
|
|
|
28.7
|
|
|
|
18.1
|
|
Grede
|
|
|
188.8
|
|
|
|
—
|
|
|
|
23.7
|
|
|
|
8.8
|
|
|
|
17.0
|
|
Elimination and other
|
|
|
—
|
|
|
|
(2.2
|
)
|
|
|
—
|
|
|
|
0.8
|
|
|
|
0.1
|
|
Total
|
|
$
|
676.2
|
|
|
|
—
|
|
|
|
113.5
|
|
|
|
51.2
|
|
|
|
55.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 27, 2015
|
|
|
|
External
Sales
|
|
|
Intersegment
Sales
|
|
|
Adjusted
EBITDA
|
|
|
Capital
Expenditures
|
|
|
Depreciation/
Amortization
|
|
|
|
(In millions)
|
|
HHI
|
|
$
|
243.9
|
|
|
|
2.1
|
|
|
|
51.2
|
|
|
|
15.8
|
|
|
|
20.3
|
|
Metaldyne
|
|
|
282.4
|
|
|
|
0.3
|
|
|
|
48.5
|
|
|
|
21.0
|
|
|
|
19.2
|
|
Grede
|
|
|
220.3
|
|
|
|
0
|
|
|
|
29.1
|
|
|
|
15.7
|
|
|
|
17.4
|
|
Elimination and other
|
|
|
—
|
|
|
|
(2.5
|
)
|
|
|
—
|
|
|
|
1.2
|
|
|
|
—
|
|
Total
|
|
$
|
746.6
|
|
|
|
—
|
|
|
|
128.8
|
|
|
|
53.7
|
|
|
|
56.9
|
|
|
|
Nine Months Ended October 2, 2016
|
|
|
|
External
Sales
|
|
|
Intersegment
Sales
|
|
|
Adjusted
EBITDA
|
|
|
Capital
Expenditures
|
|
|
Depreciation/
Amortization
|
|
|
|
(In millions)
|
|
HHI
|
|
$
|
645.4
|
|
|
|
6.3
|
|
|
|
126.3
|
|
|
|
47.4
|
|
|
|
58.1
|
|
Metaldyne
|
|
|
903.2
|
|
|
|
1.1
|
|
|
|
172.3
|
|
|
|
70.8
|
|
|
|
55.5
|
|
Grede
|
|
|
595.5
|
|
|
|
0.2
|
|
|
|
87.8
|
|
|
|
26.0
|
|
|
|
51.8
|
|
Elimination and other
|
|
|
—
|
|
|
|
(7.6
|
)
|
|
|
—
|
|
|
|
1.2
|
|
|
|
0.2
|
|
Total
|
|
$
|
2,144.1
|
|
|
|
—
|
|
|
|
386.4
|
|
|
|
145.4
|
|
|
|
165.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 27, 2015
|
|
|
|
External
Sales
|
|
|
Intersegment
Sales
|
|
|
Adjusted
EBITDA
|
|
|
Capital
Expenditures
|
|
|
Depreciation/
Amortization
|
|
|
|
(In millions)
|
|
HHI
|
|
$
|
750.1
|
|
|
|
6.6
|
|
|
|
157.3
|
|
|
|
52.4
|
|
|
|
58.7
|
|
Metaldyne
|
|
|
860.8
|
|
|
|
0.9
|
|
|
|
152.0
|
|
|
|
59.2
|
|
|
|
58.7
|
|
Grede
|
|
|
701.1
|
|
|
|
0.2
|
|
|
|
105.7
|
|
|
|
55.8
|
|
|
|
54.7
|
|
Elimination and other
|
|
|
—
|
|
|
|
(7.7
|
)
|
|
|
—
|
|
|
|
1.3
|
|
|
|
—
|
|
Total
|
|
$
|
2,312.0
|
|
|
|
—
|
|
|
|
415.0
|
|
|
|
168.7
|
|
|
|
172.1
|
|
Elimination and other above reflects the elimination of intercompany sales.
14
The reconciliation fr
om the Company’s income before tax to Adjusted EBITDA was as follows:
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
Income before tax
|
|
$
|
22.5
|
|
|
|
37.1
|
|
|
$
|
107.4
|
|
|
|
145.3
|
|
Interest expense, net
|
|
|
25.7
|
|
|
|
26.0
|
|
|
|
78.1
|
|
|
|
80.5
|
|
Depreciation and amortization
|
|
|
55.0
|
|
|
|
56.9
|
|
|
|
165.6
|
|
|
|
172.1
|
|
Loss (gain) on foreign currency
|
|
|
2.6
|
|
|
|
(2.8
|
)
|
|
|
8.8
|
|
|
|
(11.7
|
)
|
Loss on fixed assets
|
|
|
1.4
|
|
|
|
1.5
|
|
|
|
2.6
|
|
|
|
1.9
|
|
Loss on debt extinguishment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.4
|
|
Debt transaction expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.7
|
|
Stock-based compensation
|
|
|
4.4
|
|
|
|
7.9
|
|
|
|
12.6
|
|
|
|
15.4
|
|
Non-recurring acquisition and purchase accounting items
|
|
|
(1.4
|
)
|
|
|
1.3
|
|
|
|
2.0
|
|
|
|
1.4
|
|
Non-recurring operational items
|
|
|
3.3
|
|
|
|
0.9
|
|
|
|
9.3
|
|
|
|
8.0
|
|
Adjusted EBITDA
|
|
$
|
113.5
|
|
|
|
128.8
|
|
|
$
|
386.4
|
|
|
|
415.0
|
|
(20) Guarantor
Our senior notes and outstanding balances under our senior credit facilities are guaranteed by all of the Company’s existing and future domestic subsidiaries (“Guarantor Subsidiaries”). All of the Guarantor Subsidiaries are 100% owned by Metaldyne Performance Group Inc. (“Parent”) and MPG Holdco I Inc., the Company’s wholly owned subsidiary (“Issuer”). The guarantee is full, unconditional, joint and several. The Company’s non-domestic subsidiaries (“Non-Guarantor Subsidiaries”) have not guaranteed the senior notes or the senior credit facilities.
The accompanying supplemental condensed, consolidating financial information is presented using the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the Company’s share in the subsidiaries’ cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions.
15
Unaudited Condensed Consolidating Balance Sheet
October 2, 2016
(In millions)
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
|
|
|
Non-
Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
|
14.8
|
|
|
|
29.3
|
|
|
|
107.0
|
|
|
|
—
|
|
|
|
151.1
|
|
Receivables, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
|
|
—
|
|
|
|
—
|
|
|
|
289.6
|
|
|
|
90.4
|
|
|
|
(1.1
|
)
|
|
|
378.9
|
|
Other
|
|
|
—
|
|
|
|
—
|
|
|
|
83.3
|
|
|
|
20.6
|
|
|
|
(68.8
|
)
|
|
|
35.1
|
|
Total receivables, net
|
|
|
—
|
|
|
|
—
|
|
|
|
372.9
|
|
|
|
111.0
|
|
|
|
(69.9
|
)
|
|
|
414.0
|
|
Inventories
|
|
|
—
|
|
|
|
—
|
|
|
|
128.2
|
|
|
|
45.6
|
|
|
|
—
|
|
|
|
173.8
|
|
Prepaid expenses
|
|
|
—
|
|
|
|
2.1
|
|
|
|
9.0
|
|
|
|
3.0
|
|
|
|
—
|
|
|
|
14.1
|
|
Other assets
|
|
|
—
|
|
|
|
—
|
|
|
|
13.9
|
|
|
|
14.2
|
|
|
|
—
|
|
|
|
28.1
|
|
Total current assets
|
|
|
—
|
|
|
|
16.9
|
|
|
|
553.3
|
|
|
|
280.8
|
|
|
|
(69.9
|
)
|
|
|
781.1
|
|
Property and equipment, net
|
|
|
—
|
|
|
|
2.9
|
|
|
|
567.0
|
|
|
|
248.5
|
|
|
|
—
|
|
|
|
818.4
|
|
Goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
673.2
|
|
|
|
234.5
|
|
|
|
—
|
|
|
|
907.7
|
|
Amortizable intangible assets, net
|
|
|
—
|
|
|
|
—
|
|
|
|
520.6
|
|
|
|
136.0
|
|
|
|
—
|
|
|
|
656.6
|
|
Deferred income taxes
|
|
|
11.4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5.7
|
|
|
|
(11.4
|
)
|
|
|
5.7
|
|
Other assets
|
|
|
—
|
|
|
|
2.2
|
|
|
|
13.3
|
|
|
|
0.7
|
|
|
|
—
|
|
|
|
16.2
|
|
Intercompany receivables
|
|
|
108.4
|
|
|
|
1,715.7
|
|
|
|
—
|
|
|
|
0.2
|
|
|
|
(1,824.3
|
)
|
|
|
—
|
|
Investment in subsidiaries
|
|
|
697.4
|
|
|
|
837.3
|
|
|
|
704.5
|
|
|
|
—
|
|
|
|
(2,239.2
|
)
|
|
|
—
|
|
Total assets
|
|
$
|
817.2
|
|
|
|
2,575.0
|
|
|
|
3,031.9
|
|
|
|
906.4
|
|
|
|
(4,144.8
|
)
|
|
|
3,185.7
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
|
0.4
|
|
|
|
177.8
|
|
|
|
95.6
|
|
|
|
(28.4
|
)
|
|
|
245.4
|
|
Accrued compensation
|
|
|
—
|
|
|
|
0.9
|
|
|
|
37.4
|
|
|
|
14.6
|
|
|
|
—
|
|
|
|
52.9
|
|
Accrued liabilities
|
|
|
1.0
|
|
|
|
30.1
|
|
|
|
29.1
|
|
|
|
59.4
|
|
|
|
(40.8
|
)
|
|
|
78.8
|
|
Short-term debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.1
|
|
|
|
(0.7
|
)
|
|
|
0.4
|
|
Current maturities, long-term debt and
capital lease obligations
|
|
|
—
|
|
|
|
13.3
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
13.4
|
|
Total current liabilities
|
|
|
1.0
|
|
|
|
44.7
|
|
|
|
244.3
|
|
|
|
170.8
|
|
|
|
(69.9
|
)
|
|
|
390.9
|
|
Long-term debt, less current maturities
|
|
|
—
|
|
|
|
1,827.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,827.2
|
|
Capital lease obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
22.7
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22.7
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
5.0
|
|
|
|
203.4
|
|
|
|
8.1
|
|
|
|
(11.4
|
)
|
|
|
205.1
|
|
Other long-term liabilities
|
|
|
—
|
|
|
|
0.7
|
|
|
|
26.8
|
|
|
|
25.3
|
|
|
|
—
|
|
|
|
52.8
|
|
Intercompany payables
|
|
|
132.5
|
|
|
|
—
|
|
|
|
1,697.4
|
|
|
|
(5.6
|
)
|
|
|
(1,824.3
|
)
|
|
|
—
|
|
Total liabilities
|
|
|
133.5
|
|
|
|
1,877.6
|
|
|
|
2,194.6
|
|
|
|
198.6
|
|
|
|
(1,905.6
|
)
|
|
|
2,498.7
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity attributable to stockholders
|
|
|
683.7
|
|
|
|
697.4
|
|
|
|
837.3
|
|
|
|
704.5
|
|
|
|
(2,239.2
|
)
|
|
|
683.7
|
|
Noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.3
|
|
|
|
—
|
|
|
|
3.3
|
|
Total stockholders’ equity
|
|
|
683.7
|
|
|
|
697.4
|
|
|
|
837.3
|
|
|
|
707.8
|
|
|
|
(2,239.2
|
)
|
|
|
687.0
|
|
Total liabilities and stockholders’ equity
|
|
$
|
817.2
|
|
|
|
2,575.0
|
|
|
|
3,031.9
|
|
|
|
906.4
|
|
|
|
(4,144.8
|
)
|
|
|
3,185.7
|
|
16
Unaudited Condensed Consolidat
ing Balance Sheet
December 31, 2015
(In millions)
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
|
|
|
Non-
Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
|
50.5
|
|
|
|
10.8
|
|
|
|
106.9
|
|
|
|
—
|
|
|
|
168.2
|
|
Receivables, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
|
|
|
—
|
|
|
|
—
|
|
|
|
242.4
|
|
|
|
67.7
|
|
|
|
(1.0
|
)
|
|
|
309.1
|
|
Other
|
|
|
0.1
|
|
|
|
—
|
|
|
|
70.9
|
|
|
|
19.8
|
|
|
|
(55.4
|
)
|
|
|
35.4
|
|
Total receivables, net
|
|
|
0.1
|
|
|
|
—
|
|
|
|
313.3
|
|
|
|
87.5
|
|
|
|
(56.4
|
)
|
|
|
344.5
|
|
Inventories
|
|
|
—
|
|
|
|
—
|
|
|
|
139.1
|
|
|
|
47.7
|
|
|
|
—
|
|
|
|
186.8
|
|
Prepaid expenses
|
|
|
—
|
|
|
|
3.2
|
|
|
|
7.4
|
|
|
|
4.4
|
|
|
|
—
|
|
|
|
15.0
|
|
Other assets
|
|
|
5.3
|
|
|
|
—
|
|
|
|
8.6
|
|
|
|
7.6
|
|
|
|
—
|
|
|
|
21.5
|
|
Total current assets
|
|
|
5.4
|
|
|
|
53.7
|
|
|
|
479.2
|
|
|
|
254.1
|
|
|
|
(56.4
|
)
|
|
|
736.0
|
|
Property and equipment, net
|
|
|
—
|
|
|
|
2.0
|
|
|
|
546.3
|
|
|
|
237.7
|
|
|
|
—
|
|
|
|
786.0
|
|
Goodwill
|
|
|
—
|
|
|
|
—
|
|
|
|
673.2
|
|
|
|
234.5
|
|
|
|
—
|
|
|
|
907.7
|
|
Amortizable intangible assets, net
|
|
|
—
|
|
|
|
—
|
|
|
|
561.7
|
|
|
|
147.2
|
|
|
|
—
|
|
|
|
708.9
|
|
Deferred income taxes
|
|
|
14.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.7
|
|
|
|
(14.2
|
)
|
|
|
1.7
|
|
Other assets
|
|
|
—
|
|
|
|
2.8
|
|
|
|
14.2
|
|
|
|
0.3
|
|
|
|
—
|
|
|
|
17.3
|
|
Intercompany receivables
|
|
|
56.2
|
|
|
|
1,734.6
|
|
|
|
—
|
|
|
|
5.0
|
|
|
|
(1,795.8
|
)
|
|
|
—
|
|
Investment in subsidiaries
|
|
|
619.0
|
|
|
|
695.9
|
|
|
|
673.8
|
|
|
|
—
|
|
|
|
(1,988.7
|
)
|
|
|
—
|
|
Total assets
|
|
$
|
694.8
|
|
|
|
2,489.0
|
|
|
|
2,948.4
|
|
|
|
880.5
|
|
|
|
(3,855.1
|
)
|
|
|
3,157.6
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
|
1.0
|
|
|
|
165.7
|
|
|
|
105.0
|
|
|
|
(22.8
|
)
|
|
|
248.9
|
|
Accrued compensation
|
|
|
—
|
|
|
|
4.4
|
|
|
|
38.5
|
|
|
|
12.3
|
|
|
|
—
|
|
|
|
55.2
|
|
Accrued liabilities
|
|
|
0.5
|
|
|
|
19.1
|
|
|
|
27.2
|
|
|
|
53.6
|
|
|
|
(33.6
|
)
|
|
|
66.8
|
|
Short-term debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.7
|
|
|
|
—
|
|
|
|
0.7
|
|
Current maturities, long-term debt and
capital lease obligations
|
|
|
—
|
|
|
|
13.2
|
|
|
|
1.1
|
|
|
|
0.2
|
|
|
|
—
|
|
|
|
14.5
|
|
Total current liabilities
|
|
|
0.5
|
|
|
|
37.7
|
|
|
|
232.5
|
|
|
|
171.8
|
|
|
|
(56.4
|
)
|
|
|
386.1
|
|
Long-term debt, less current maturities
|
|
|
—
|
|
|
|
1,826.9
|
|
|
|
—
|
|
|
|
0.2
|
|
|
|
—
|
|
|
|
1,827.1
|
|
Capital lease obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
22.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22.5
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
5.0
|
|
|
|
233.4
|
|
|
|
7.1
|
|
|
|
(14.2
|
)
|
|
|
231.3
|
|
Other long-term liabilities
|
|
|
—
|
|
|
|
0.4
|
|
|
|
26.5
|
|
|
|
24.7
|
|
|
|
—
|
|
|
|
51.6
|
|
Intercompany payables
|
|
|
58.2
|
|
|
|
—
|
|
|
|
1,737.6
|
|
|
|
—
|
|
|
|
(1,795.8
|
)
|
|
|
—
|
|
Total liabilities
|
|
|
58.7
|
|
|
|
1,870.0
|
|
|
|
2,252.5
|
|
|
|
203.8
|
|
|
|
(1,866.4
|
)
|
|
|
2,518.6
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity attributable to stockholders
|
|
|
636.1
|
|
|
|
619.0
|
|
|
|
695.9
|
|
|
|
673.8
|
|
|
|
(1,988.7
|
)
|
|
|
636.1
|
|
Noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2.9
|
|
|
|
—
|
|
|
|
2.9
|
|
Total stockholders’ equity
|
|
|
636.1
|
|
|
|
619.0
|
|
|
|
695.9
|
|
|
|
676.7
|
|
|
|
(1,988.7
|
)
|
|
|
639.0
|
|
Total liabilities and stockholders’ equity
|
|
$
|
694.8
|
|
|
|
2,489.0
|
|
|
|
2,948.4
|
|
|
|
880.5
|
|
|
|
(3,855.1
|
)
|
|
|
3,157.6
|
|
17
Unaudited Condensed Consolidating Statements of Operations
(In millions)
Quarter Ended October 2, 2016
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net sales
|
|
$
|
—
|
|
|
|
—
|
|
|
|
528.8
|
|
|
|
184.6
|
|
|
|
(37.2
|
)
|
|
|
676.2
|
|
Cost of sales
|
|
|
—
|
|
|
|
—
|
|
|
|
450.4
|
|
|
|
156.6
|
|
|
|
(37.2
|
)
|
|
|
569.8
|
|
Gross profit
|
|
|
—
|
|
|
|
—
|
|
|
|
78.4
|
|
|
|
28.0
|
|
|
|
—
|
|
|
|
106.4
|
|
Selling, general and administrative expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
45.1
|
|
|
|
11.1
|
|
|
|
—
|
|
|
|
56.2
|
|
Operating income
|
|
|
—
|
|
|
|
—
|
|
|
|
33.3
|
|
|
|
16.9
|
|
|
|
—
|
|
|
|
50.2
|
|
Interest expense, net
|
|
|
—
|
|
|
|
24.5
|
|
|
|
(0.9
|
)
|
|
|
2.1
|
|
|
|
—
|
|
|
|
25.7
|
|
Other, net
|
|
|
—
|
|
|
|
2.1
|
|
|
|
(3.2
|
)
|
|
|
3.1
|
|
|
|
—
|
|
|
|
2.0
|
|
Other expense (income), net
|
|
|
—
|
|
|
|
26.6
|
|
|
|
(4.1
|
)
|
|
|
5.2
|
|
|
|
—
|
|
|
|
27.7
|
|
Income (loss) before tax
|
|
|
—
|
|
|
|
(26.6
|
)
|
|
|
37.4
|
|
|
|
11.7
|
|
|
|
—
|
|
|
|
22.5
|
|
Income tax expense (benefit)
|
|
|
—
|
|
|
|
(2.7
|
)
|
|
|
0.6
|
|
|
|
5.2
|
|
|
|
—
|
|
|
|
3.1
|
|
Income (loss) before earnings from equity in
subsidiaries
|
|
|
—
|
|
|
|
(23.9
|
)
|
|
|
36.8
|
|
|
|
6.5
|
|
|
|
—
|
|
|
|
19.4
|
|
Earnings from equity in subsidiaries
|
|
|
19.3
|
|
|
|
43.2
|
|
|
|
6.4
|
|
|
|
—
|
|
|
|
(68.9
|
)
|
|
|
—
|
|
Net income
|
|
|
19.3
|
|
|
|
19.3
|
|
|
|
43.2
|
|
|
|
6.5
|
|
|
|
(68.9
|
)
|
|
|
19.4
|
|
Income attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
0.1
|
|
Net income attributable to stockholders
|
|
$
|
19.3
|
|
|
|
19.3
|
|
|
|
43.2
|
|
|
|
6.4
|
|
|
|
(68.9
|
)
|
|
|
19.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 27, 2015
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net sales
|
|
$
|
—
|
|
|
|
—
|
|
|
|
605.6
|
|
|
|
180.9
|
|
|
|
(39.9
|
)
|
|
|
746.6
|
|
Cost of sales
|
|
|
—
|
|
|
|
—
|
|
|
|
507.7
|
|
|
|
152.6
|
|
|
|
(39.9
|
)
|
|
|
620.4
|
|
Gross profit
|
|
|
—
|
|
|
|
—
|
|
|
|
97.9
|
|
|
|
28.3
|
|
|
|
—
|
|
|
|
126.2
|
|
Selling, general and administrative expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
53.9
|
|
|
|
10.9
|
|
|
|
—
|
|
|
|
64.8
|
|
Operating income
|
|
|
—
|
|
|
|
—
|
|
|
|
44.0
|
|
|
|
17.4
|
|
|
|
—
|
|
|
|
61.4
|
|
Interest expense, net
|
|
|
—
|
|
|
|
24.8
|
|
|
|
(1.1
|
)
|
|
|
2.3
|
|
|
|
—
|
|
|
|
26.0
|
|
Loss on debt extinguishment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
-
|
|
Other, net
|
|
|
—
|
|
|
|
0.6
|
|
|
|
(2.3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.7
|
)
|
Other expense (income), net
|
|
|
—
|
|
|
|
25.4
|
|
|
|
(3.4
|
)
|
|
|
2.3
|
|
|
|
—
|
|
|
|
24.3
|
|
Income (loss) before tax
|
|
|
—
|
|
|
|
(25.4
|
)
|
|
|
47.4
|
|
|
|
15.1
|
|
|
|
—
|
|
|
|
37.1
|
|
Income tax expense (benefit)
|
|
|
—
|
|
|
|
(8.3
|
)
|
|
|
12.8
|
|
|
|
4.3
|
|
|
|
—
|
|
|
|
8.8
|
|
Income (loss) before earnings from equity in
subsidiaries
|
|
|
—
|
|
|
|
(17.1
|
)
|
|
|
34.6
|
|
|
|
10.8
|
|
|
|
—
|
|
|
|
28.3
|
|
Earnings from equity in subsidiaries
|
|
|
28.2
|
|
|
|
45.3
|
|
|
|
10.7
|
|
|
|
—
|
|
|
|
(84.2
|
)
|
|
|
—
|
|
Net income
|
|
|
28.2
|
|
|
|
28.2
|
|
|
|
45.3
|
|
|
|
10.8
|
|
|
|
(84.2
|
)
|
|
|
28.3
|
|
Income attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
0.1
|
|
Net income attributable to stockholders
|
|
$
|
28.2
|
|
|
|
28.2
|
|
|
|
45.3
|
|
|
|
10.7
|
|
|
|
(84.2
|
)
|
|
|
28.2
|
|
18
Unaudited Condensed Consolida
ting Statements of Operations (Continued)
(In millions)
Nine Months Ended October 2, 2016
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net sales
|
|
$
|
—
|
|
|
|
—
|
|
|
|
1,682.5
|
|
|
|
571.9
|
|
|
|
(110.3
|
)
|
|
|
2,144.1
|
|
Cost of sales
|
|
|
—
|
|
|
|
—
|
|
|
|
1,402.9
|
|
|
|
478.3
|
|
|
|
(110.3
|
)
|
|
|
1,770.9
|
|
Gross profit
|
|
|
—
|
|
|
|
—
|
|
|
|
279.6
|
|
|
|
93.6
|
|
|
|
—
|
|
|
|
373.2
|
|
Selling, general and administrative expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
143.1
|
|
|
|
33.9
|
|
|
|
—
|
|
|
|
177.0
|
|
Operating income
|
|
|
—
|
|
|
|
—
|
|
|
|
136.5
|
|
|
|
59.7
|
|
|
|
—
|
|
|
|
196.2
|
|
Interest expense, net
|
|
|
—
|
|
|
|
74.4
|
|
|
|
(2.7
|
)
|
|
|
6.4
|
|
|
|
—
|
|
|
|
78.1
|
|
Other, net
|
|
|
—
|
|
|
|
7.7
|
|
|
|
(5.3
|
)
|
|
|
8.3
|
|
|
|
—
|
|
|
|
10.7
|
|
Other expense (income), net
|
|
|
—
|
|
|
|
82.1
|
|
|
|
(8.0
|
)
|
|
|
14.7
|
|
|
|
—
|
|
|
|
88.8
|
|
Income (loss) before tax
|
|
|
—
|
|
|
|
(82.1
|
)
|
|
|
144.5
|
|
|
|
45.0
|
|
|
|
—
|
|
|
|
107.4
|
|
Income tax expense (benefit)
|
|
|
—
|
|
|
|
(19.2
|
)
|
|
|
35.0
|
|
|
|
11.5
|
|
|
|
—
|
|
|
|
27.3
|
|
Income (loss) before earnings from equity in
subsidiaries
|
|
|
—
|
|
|
|
(62.9
|
)
|
|
|
109.5
|
|
|
|
33.5
|
|
|
|
—
|
|
|
|
80.1
|
|
Earnings from equity in subsidiaries
|
|
|
79.7
|
|
|
|
142.6
|
|
|
|
33.1
|
|
|
|
—
|
|
|
|
(255.4
|
)
|
|
|
—
|
|
Net income
|
|
|
79.7
|
|
|
|
79.7
|
|
|
|
142.6
|
|
|
|
33.5
|
|
|
|
(255.4
|
)
|
|
|
80.1
|
|
Income attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.4
|
|
|
|
—
|
|
|
|
0.4
|
|
Net income attributable to stockholders
|
|
$
|
79.7
|
|
|
|
79.7
|
|
|
|
142.6
|
|
|
|
33.1
|
|
|
|
(255.4
|
)
|
|
|
79.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 27, 2015
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net sales
|
|
$
|
—
|
|
|
|
—
|
|
|
|
1,856.9
|
|
|
|
555.6
|
|
|
|
(100.5
|
)
|
|
|
2,312.0
|
|
Cost of sales
|
|
|
—
|
|
|
|
—
|
|
|
|
1,549.5
|
|
|
|
466.2
|
|
|
|
(100.5
|
)
|
|
|
1,915.2
|
|
Gross profit
|
|
|
—
|
|
|
|
—
|
|
|
|
307.4
|
|
|
|
89.4
|
|
|
|
—
|
|
|
|
396.8
|
|
Selling, general and administrative expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
146.1
|
|
|
|
32.7
|
|
|
|
—
|
|
|
|
178.8
|
|
Operating income
|
|
|
—
|
|
|
|
—
|
|
|
|
161.3
|
|
|
|
56.7
|
|
|
|
—
|
|
|
|
218.0
|
|
Interest expense, net
|
|
|
—
|
|
|
|
76.5
|
|
|
|
(3.2
|
)
|
|
|
7.2
|
|
|
|
—
|
|
|
|
80.5
|
|
Loss on debt extinguishment
|
|
|
—
|
|
|
|
0.4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.4
|
|
Other, net
|
|
|
—
|
|
|
|
(1.8
|
)
|
|
|
(7.0
|
)
|
|
|
0.6
|
|
|
|
—
|
|
|
|
(8.2
|
)
|
Other expense (income), net
|
|
|
—
|
|
|
|
75.1
|
|
|
|
(10.2
|
)
|
|
|
7.8
|
|
|
|
—
|
|
|
|
72.7
|
|
Income (loss) before tax
|
|
|
—
|
|
|
|
(75.1
|
)
|
|
|
171.5
|
|
|
|
48.9
|
|
|
|
—
|
|
|
|
145.3
|
|
Income tax expense (benefit)
|
|
|
—
|
|
|
|
(24.3
|
)
|
|
|
50.0
|
|
|
|
14.6
|
|
|
|
—
|
|
|
|
40.3
|
|
Income (loss) before earnings from equity in
subsidiaries
|
|
|
—
|
|
|
|
(50.8
|
)
|
|
|
121.5
|
|
|
|
34.3
|
|
|
|
—
|
|
|
|
105.0
|
|
Earnings from equity in subsidiaries
|
|
|
104.7
|
|
|
|
155.5
|
|
|
|
34.0
|
|
|
|
—
|
|
|
|
(294.2
|
)
|
|
|
—
|
|
Net income
|
|
|
104.7
|
|
|
|
104.7
|
|
|
|
155.5
|
|
|
|
34.3
|
|
|
|
(294.2
|
)
|
|
|
105.0
|
|
Income attributable to noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.3
|
|
|
|
—
|
|
|
|
0.3
|
|
Net income attributable to stockholders
|
|
$
|
104.7
|
|
|
|
104.7
|
|
|
|
155.5
|
|
|
|
34.0
|
|
|
|
(294.2
|
)
|
|
|
104.7
|
|
19
Unaudited Condensed Consolidat
ing Statements of Comprehensive Income
(In millions)
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Quarter Ended October 2, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
19.3
|
|
|
|
19.3
|
|
|
|
43.2
|
|
|
|
6.5
|
|
|
|
(68.9
|
)
|
|
|
19.4
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.2
|
|
|
|
(1.2
|
)
|
|
|
0.5
|
|
Comprehensive income
|
|
|
19.8
|
|
|
|
19.8
|
|
|
|
43.7
|
|
|
|
6.7
|
|
|
|
(70.1
|
)
|
|
|
19.9
|
|
Less comprehensive income attributable to
noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
0.1
|
|
Comprehensive income attributable
to stockholders
|
|
$
|
19.8
|
|
|
|
19.8
|
|
|
|
43.7
|
|
|
|
6.6
|
|
|
|
(70.1
|
)
|
|
|
19.8
|
|
Quarter Ended September 27, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
28.2
|
|
|
|
28.2
|
|
|
|
45.3
|
|
|
|
10.8
|
|
|
|
(84.2
|
)
|
|
|
28.3
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Foreign currency translation
|
|
|
(8.3
|
)
|
|
|
(8.7
|
)
|
|
|
(8.7
|
)
|
|
|
(8.6
|
)
|
|
|
26.0
|
|
|
|
(8.3
|
)
|
Comprehensive income
|
|
|
19.9
|
|
|
|
19.5
|
|
|
|
36.6
|
|
|
|
2.2
|
|
|
|
(58.2
|
)
|
|
|
20.0
|
|
Less comprehensive income attributable to
noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
0.1
|
|
Comprehensive income attributable
to stockholders
|
|
$
|
19.9
|
|
|
|
19.5
|
|
|
|
36.6
|
|
|
|
2.1
|
|
|
|
(58.2
|
)
|
|
|
19.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended October 2, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
79.7
|
|
|
|
79.7
|
|
|
|
142.6
|
|
|
|
33.5
|
|
|
|
(255.4
|
)
|
|
|
80.1
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(1.1
|
)
|
|
|
(1.2
|
)
|
|
|
(1.2
|
)
|
|
|
(2.2
|
)
|
|
|
4.6
|
|
|
|
(1.1
|
)
|
Comprehensive income
|
|
|
78.6
|
|
|
|
78.5
|
|
|
|
141.4
|
|
|
|
31.3
|
|
|
|
(250.8
|
)
|
|
|
79.0
|
|
Less comprehensive income attributable to
noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.4
|
|
|
|
—
|
|
|
|
0.4
|
|
Comprehensive income attributable
to stockholders
|
|
$
|
78.6
|
|
|
|
78.5
|
|
|
|
141.4
|
|
|
|
30.9
|
|
|
|
(250.8
|
)
|
|
|
78.6
|
|
Nine Months Ended September 27, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
104.7
|
|
|
|
104.7
|
|
|
|
155.5
|
|
|
|
34.3
|
|
|
|
(294.2
|
)
|
|
|
105.0
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(20.1
|
)
|
|
|
(20.7
|
)
|
|
|
(20.7
|
)
|
|
|
(18.3
|
)
|
|
|
59.7
|
|
|
|
(20.1
|
)
|
Comprehensive income
|
|
|
84.6
|
|
|
|
84.0
|
|
|
|
134.8
|
|
|
|
16.0
|
|
|
|
(234.5
|
)
|
|
|
84.9
|
|
Less comprehensive income attributable to
noncontrolling interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.3
|
|
|
|
—
|
|
|
|
0.3
|
|
Comprehensive income attributable
to stockholders
|
|
$
|
84.6
|
|
|
|
84.0
|
|
|
|
134.8
|
|
|
|
15.7
|
|
|
|
(234.5
|
)
|
|
|
84.6
|
|
20
Unaudited Condensed Consolidating Stateme
nts of Cash Flows
(In millions)
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Nine Months Ended October 2, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
|
$
|
20.9
|
|
|
|
(43.2
|
)
|
|
|
178.7
|
|
|
|
40.0
|
|
|
|
—
|
|
|
|
196.4
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
—
|
|
|
|
(1.3
|
)
|
|
|
(104.8
|
)
|
|
|
(39.3
|
)
|
|
|
—
|
|
|
|
(145.4
|
)
|
Proceeds from sale of fixed assets
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
0.2
|
|
Capitalized patent costs
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.2
|
)
|
Acquisition of business, net of cash acquired
|
|
|
—
|
|
|
|
—
|
|
|
|
(14.0
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(14.0
|
)
|
Intercompany activity
|
|
|
22.2
|
|
|
|
18.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(41.0
|
)
|
|
|
—
|
|
Net cash provided by (used for) investing activities
|
|
|
22.2
|
|
|
|
17.5
|
|
|
|
(118.9
|
)
|
|
|
(39.2
|
)
|
|
|
(41.0
|
)
|
|
|
(159.4
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends
|
|
|
(18.7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(18.7
|
)
|
Proceeds from stock issuance
|
|
|
1.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.8
|
|
Purchases of treasury stock
|
|
|
(25.6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(25.6
|
)
|
Excess tax benefit on stock-based compensation
|
|
|
0.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.9
|
|
Cash settlement of equity awards
|
|
|
(1.5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.5
|
)
|
Payments on long-term debt
|
|
|
—
|
|
|
|
(10.0
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10.0
|
)
|
Other debt, net
|
|
|
—
|
|
|
|
—
|
|
|
|
(1.2
|
)
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1.8
|
)
|
Intercompany activity
|
|
|
—
|
|
|
|
—
|
|
|
|
(40.1
|
)
|
|
|
(0.9
|
)
|
|
|
41.0
|
|
|
|
—
|
|
Net cash used for financing activities
|
|
|
(43.1
|
)
|
|
|
(10.0
|
)
|
|
|
(41.3
|
)
|
|
|
(1.5
|
)
|
|
|
41.0
|
|
|
|
(54.9
|
)
|
Effect of exchange rates on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.8
|
|
|
|
—
|
|
|
|
0.80
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
—
|
|
|
|
(35.7
|
)
|
|
|
18.5
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
(17.1
|
)
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
$
|
—
|
|
|
|
50.5
|
|
|
|
10.8
|
|
|
|
106.9
|
|
|
|
—
|
|
|
|
168.2
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
—
|
|
|
|
(35.7
|
)
|
|
|
18.5
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
(17.1
|
)
|
Cash and cash equivalents, end of period
|
|
$
|
—
|
|
|
|
14.8
|
|
|
|
29.3
|
|
|
|
107.0
|
|
|
|
—
|
|
|
|
151.1
|
|
Nine Months Ended September 27, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) operating activities
|
|
$
|
15.1
|
|
|
|
(35.8
|
)
|
|
|
176.1
|
|
|
|
56.2
|
|
|
|
—
|
|
|
|
211.6
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
—
|
|
|
|
(1.3
|
)
|
|
|
(130.7
|
)
|
|
|
(36.7
|
)
|
|
|
—
|
|
|
|
(168.7
|
)
|
Proceeds from sale of fixed assets
|
|
|
—
|
|
|
|
—
|
|
|
|
3.6
|
|
|
|
0.2
|
|
|
|
—
|
|
|
|
3.8
|
|
Capitalized patent costs
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.3
|
)
|
Intercompany activity
|
|
|
(4.2
|
)
|
|
|
49.4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(45.2
|
)
|
|
|
—
|
|
Net cash provided by (used for) investing activities
|
|
|
(4.2
|
)
|
|
|
48.1
|
|
|
|
(127.4
|
)
|
|
|
(36.5
|
)
|
|
|
(45.2
|
)
|
|
|
(165.2
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends
|
|
|
(12.1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(12.1
|
)
|
Stock-based compensation activity, net
|
|
|
3.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.6
|
|
Borrowings of revolving lines of credit
|
|
|
—
|
|
|
|
14.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14.3
|
|
Payments of revolving lines of credit
|
|
|
—
|
|
|
|
(14.3
|
)
|
|
|
(0.3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(14.6
|
)
|
Proceeds of long-term debt
|
|
|
—
|
|
|
|
1,326.6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,326.6
|
|
Payments on long-term debt
|
|
|
—
|
|
|
|
(1,385.0
|
)
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,385.2
|
)
|
Payment of debt issue costs
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
Other debt, net
|
|
|
—
|
|
|
|
—
|
|
|
|
(2.2
|
)
|
|
|
0.3
|
|
|
|
—
|
|
|
|
(1.9
|
)
|
Payment of offering related costs
|
|
|
(0.1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
Intercompany activity
|
|
|
—
|
|
|
|
—
|
|
|
|
(44.7
|
)
|
|
|
(0.5
|
)
|
|
|
45.2
|
|
|
|
—
|
|
Net cash used for financing activities
|
|
|
(8.6
|
)
|
|
|
(58.5
|
)
|
|
|
(47.4
|
)
|
|
|
(0.2
|
)
|
|
|
45.2
|
|
|
|
(69.5
|
)
|
Effect of exchange rates on cash
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8.8
|
)
|
|
|
—
|
|
|
|
(8.8
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
2.3
|
|
|
|
(46.2
|
)
|
|
|
1.3
|
|
|
|
10.7
|
|
|
|
—
|
|
|
|
(31.9
|
)
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
$
|
—
|
|
|
|
52.3
|
|
|
|
3.2
|
|
|
|
101.0
|
|
|
|
—
|
|
|
|
156.5
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2.3
|
|
|
|
(46.2
|
)
|
|
|
1.3
|
|
|
|
10.7
|
|
|
|
—
|
|
|
|
(31.9
|
)
|
Cash and cash equivalents, end of period
|
|
$
|
2.3
|
|
|
|
6.1
|
|
|
|
4.5
|
|
|
|
111.7
|
|
|
|
—
|
|
|
|
124.6
|
|
21
(21) Subsequent Events
Dividend
On November 2, 2016, our board of directors declared a dividend of $0.0925 per share of common stock outstanding, payable on December 9, 2016 to stockholders of record as of November 18, 2016.
Definitive Merger Agreement
On November 3, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, American Axle & Manufacturing Holdings, Inc. (“American Axle”) and Alpha SPV I, Inc. (“Merger Sub”), a wholly owned subsidiary of American Axle, pursuant to which American Axle will acquire all of the outstanding equity of the Company for a purchase price of approximately $1.6 billion.
In accordance with and subject to the terms and conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger and continuing as a wholly-owned subsidiary of American Axle. Upon consummation of the transactions contemplated by the Merger Agreement, each outstanding share of common stock, par value $0.001 per share, of the Company will automatically be converted into the right to receive (i) $13.50 per share in cash (without interest) and (ii) 0.5 shares of common stock, par value $0.01 per share, of American Axle.
The consummation of the Merger and the transactions contemplated by the Merger Agreement are subject to the satisfaction of customary closing conditions, including the receipt of certain required regulatory approvals, the approval of the Merger Agreement by the requisite vote of the Company’s stockholders and approval of the issuance of shares of common stock of American Axle to the Company’s stockholders in the Merger by the requisite vote of American Axle’s stockholders.
Suspension of Share Repurchase Program
On November 3, 2016 the Company suspended its Share Repurchase Program. As of November 3, 2016, cumulative shares repurchased totaled 1,898,261 shares at an average purchase price per share of $15.56.
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS O
F FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report for the year ended December 31, 2015 as filed on February 29, 2016 with the Securities and Exchange Commission (“SEC”) and the Notes to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this report.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We may also make forward-looking statements in other reports filed with the SEC, including the documents incorporated herein by reference, in materials delivered to stockholders, and in press releases. In addition, our officers and representatives may from time to time make oral forward-looking statements.
All statements other than statements of historical fact or relating to present facts or current conditions included in this Form 10-Q are forward-looking statements. Forward-looking statements give our current beliefs, expectations and assumptions relating to our financial condition, results of operations, plans, projections, objectives, strategies, anticipated events and trends, future performance and business, the economy and other future conditions. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “will,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “could,” “can have,” “likely,” “goal,” “seek,” “strategy,” “future,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
The forward-looking statements contained in this Form 10-Q are based on assumptions that we have made. As you read and consider this Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions and you should not rely on any of these forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors are difficult to predict and could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements, including many factors that are outside of our control. We believe these factors include, but are not limited to, those described under or incorporated in
“Item 1A. Risk Factors of Part II” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.
Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which we make it. Factors or events that could cause our actual operating and financial performance to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Overview
We are a leading provider of highly-engineered components for use in Powertrain and Safety-Critical Applications for the global light, commercial and industrial vehicle markets. We produce these components using complex metal-forming manufacturing technologies and processes for a global customer base of vehicle OEMs and tier I suppliers. We are headquartered in Southfield, Michigan, and our manufacturing is conducted in 55 production facilities located throughout North and South America, Europe and Asia.
Our Segments
We are organized in, operate and report our results of operations for three segments:
|
•
|
HHI segment, which is comprised of the HHI business;
|
|
•
|
Metaldyne segment, which is comprised of the Metaldyne business; and
|
|
•
|
Grede segment, which is comprised of the Grede business.
|
23
We allocate the corporate costs of MPG equally among the three segments due to their similar size and nature of the costs, unless a cost is specific to a certain segment.
Results of Operations
Quarter Ended October 2, 2016 compared to Quarter Ended September 27, 2015
The following table sets forth our statement of operations for the periods presented.
|
|
Quarter Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
Net sales
|
|
$
|
676.2
|
|
|
|
746.6
|
|
Cost of sales
|
|
|
569.8
|
|
|
|
620.4
|
|
Gross profit
|
|
|
106.4
|
|
|
|
126.2
|
|
Selling, general and administrative expenses
|
|
|
56.2
|
|
|
|
64.8
|
|
Operating income
|
|
|
50.2
|
|
|
|
61.4
|
|
Interest expense, net
|
|
|
25.7
|
|
|
|
26.0
|
|
Loss on debt extinguishment
|
|
|
—
|
|
|
|
—
|
|
Other, net
|
|
|
2.0
|
|
|
|
(1.7
|
)
|
Income before taxes
|
|
|
22.5
|
|
|
|
37.1
|
|
Income tax expense
|
|
|
3.1
|
|
|
|
8.8
|
|
Net income
|
|
|
19.4
|
|
|
|
28.3
|
|
Income attributable to noncontrolling interests
|
|
|
0.1
|
|
|
|
0.1
|
|
Net income attributable to stockholders
|
|
$
|
19.3
|
|
|
|
28.2
|
|
Net Sales
Net sales were $676.2 million for the quarter ended October 2, 2016, as compared to $746.6 million for the quarter ended September 27, 2015, a decrease of $70.4 million. The decrease was primarily driven by an industrial and commercial sales decline of approximately $28 million, a decrease of approximately $21 million from the scheduled attrition of wheel bearing programs, a decrease in light vehicle sales of approximately $12 million, lower raw material surcharge pass-through of approximately $7 million, and net price decreases of approximately $4 million, partially offset by $4 million of additional sales from the acquisition of Brillion Iron Works, Inc. on September 2, 2016 (the “Brillion Acquisition”).
The following table sets forth our net sales by segment for the quarters ended October 2, 2016 and September 27, 2015:
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
Increase
(Decrease)
|
|
|
Percent
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
HHI segment
|
|
$
|
204.7
|
|
|
|
243.9
|
|
|
|
(39.2
|
)
|
|
|
(16.1
|
)%
|
Metaldyne segment
|
|
|
282.7
|
|
|
|
282.4
|
|
|
|
0.3
|
|
|
|
0.1
|
%
|
Grede segment
|
|
|
188.8
|
|
|
|
220.3
|
|
|
|
(31.5
|
)
|
|
|
(14.3
|
)%
|
Total
|
|
$
|
676.2
|
|
|
|
746.6
|
|
|
|
(70.4
|
)
|
|
|
|
|
The decrease in HHI net sales was primarily attributable to scheduled attrition of wheel bearing programs of approximately $21 million, a decrease in certain light vehicle platform volumes of approximately $12 million, lower raw material surcharge pass-through of approximately $3 million, and net price decreases of approximately $1 million.
The slight increase in Metaldyne net sales was primarily attributable to increased light vehicle volumes of approximately $5 million, partially offset by net price decreases of approximately $2 million and lower raw material surcharge pass-through of approximately $2 million.
The decrease in Grede net sales was primarily attributable to the decrease in industrial and commercial volumes of approximately $28 million, a decrease in light vehicle volumes of approximately $5 million, lower raw material surcharge pass-
24
through of approximately $2 million, and net price reductions of approximately $
1 million, partially offset by $4 million additional sales from Brillion acquisition in September 2016.
Cost of Sales
Cost of sales was $569.8 million for the quarter ended October 2, 2016, as compared to $620.4 million for the quarter ended September 27, 2015, a decrease of $50.6 million. This decrease was primarily driven by lower volumes in industrial, commercial and light vehicles, scheduled attrition of wheel bearing programs of approximately $11 million, the lower raw material surcharge costs of approximately $7 million, net manufacturing cost reductions, and lower depreciation.
The following table sets forth our cost of sales by segment for the quarters ended October 2, 2016 and September 27, 2015:
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
Increase
(Decrease)
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
HHI segment
|
|
$
|
172.0
|
|
|
|
199.7
|
|
|
|
(27.7
|
)
|
|
|
(13.9
|
)%
|
Metaldyne segment
|
|
|
234.2
|
|
|
|
237.5
|
|
|
|
(3.3
|
)
|
|
|
(1.4
|
)%
|
Grede segment
|
|
|
163.6
|
|
|
|
183.2
|
|
|
|
(19.6
|
)
|
|
|
(10.7
|
)%
|
Total
|
|
$
|
569.8
|
|
|
|
620.4
|
|
|
|
(50.6
|
)
|
|
|
|
|
The decrease in HHI cost of sales was primarily due to an $11 million decrease in manufacturing costs from the scheduled attrition of wheel bearing programs, lower volumes in light vehicle production, and lower raw material surcharge costs of approximately $3 million.
The decrease in Metaldyne cost of sales was primarily attributable to foreign currency movements, lower raw material surcharge costs, and net manufacturing costs reductions.
The decrease in Grede cost of sales was primarily attributable to lower volume of approximately $16 million, lower raw material surcharge costs of approximately $2 million, and net manufacturing cost reductions.
Gross Profit
Gross profit was $106.4 million for the quarter ended October 2, 2016, as compared to $126.2 million for the quarter ended September 27, 2015, a decrease of $19.8 million. The decrease was primarily driven by the factors discussed above.
The following table sets forth our gross profit by segment for the quarters ended October 2, 2016 and September 27, 2015:
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
Increase
(Decrease)
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
HHI segment
|
|
$
|
32.7
|
|
|
|
44.2
|
|
|
|
(11.5
|
)
|
|
|
(26.0
|
)%
|
Metaldyne segment
|
|
|
48.5
|
|
|
|
44.9
|
|
|
|
3.6
|
|
|
|
8.0
|
%
|
Grede segment
|
|
|
25.2
|
|
|
|
37.1
|
|
|
|
(11.9
|
)
|
|
|
(32.1
|
)%
|
Total
|
|
$
|
106.4
|
|
|
|
126.2
|
|
|
|
(19.8
|
)
|
|
|
|
|
Operating Income
Operating income was $50.2 million for the quarter ended October 2, 2016, as compared to $61.4 million for the quarter ended September 27, 2015, a decrease of $11.2 million. This decrease was primarily driven by the impact of lower gross profit of $19.8 million described above, partially offset by a $8.6 million decrease in selling, general, and administrative expenses. The decrease in selling, general, and administrative expenses was primarily due to lower professional fees, lower employee related costs and lower stock-based compensation.
25
The following table sets forth our operating income by segment for the quarters ended October 2, 2016 and September 27, 2015:
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
Increase
(Decrease)
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
HHI segment
|
|
$
|
17.1
|
|
|
|
24.9
|
|
|
|
(7.8
|
)
|
|
|
(31.3
|
)%
|
Metaldyne segment
|
|
|
31.1
|
|
|
|
26.6
|
|
|
|
4.5
|
|
|
|
16.9
|
%
|
Grede segment
|
|
|
2.0
|
|
|
|
9.9
|
|
|
|
(7.9
|
)
|
|
|
(79.8
|
)%
|
Total
|
|
$
|
50.2
|
|
|
|
61.4
|
|
|
|
(11.2
|
)
|
|
|
|
|
The decrease in HHI operating income was primarily attributable to the decrease in gross profit, partially offset by lower selling, general and administrative expenses.
The increase in Metaldyne operating income was primarily attributable to the increase in gross profit.
The decrease in Grede operating income was primarily attributable to the decrease in gross profit, partially offset by lower selling, general and administrative expenses.
Interest Expense, Net
Interest expense, net was $25.7 million for the quarter ended October 2, 2016, as compared to $26.0 million for the quarter ended September 27, 2015, a decrease of $0.3 million. The decrease in interest expense, net reflected lower average outstanding borrowings due to the pay down of long-term debt in 2015.
Other, Net
Other, net reflected a loss of $2.0 million for the quarter ended October 2, 2016, as compared to income of $1.7 million for the quarter ended September 27, 2015, an unfavorable change of $3.7 million. The change in other, net compared to the prior period was primarily due to a $5.6 million unfavorable change in gain or loss on foreign currency transactions, partially offset by a gain on bargain purchase of $1.0 million associated with the Brillion Acquisition.
Income Taxes
The income tax provision for the quarter ended October 2, 2016 and September 27, 2015 was $3.1 million and $8.8 million, respectively. The $5.7 million decrease was primarily attributable to a reduction in income before tax and a favorable geographic income mix during 2016 as compared with 2015, partially offset by the impact of discrete tax items. Our effective tax rate for the quarter ended October 2, 2016 and September 27, 2015 was 13.6% and 23.7%, respectively.
Net Income Attributable to Stockholders
Net income attributable to stockholders was $19.3 million, or 2.9% of net sales for the quarter ended October 2, 2016, as compared to $28.2 million, or 3.8% of net sales for the quarter ended September 27, 2015, a decrease of $8.9 million. The decrease was primarily attributable to the factors discussed above.
26
Adjusted EBITDA
Management’s assessment of performance includes an evaluation of Adjusted EBITDA. The following table sets forth Adjusted EBITDA by segment.
|
|
Quarter Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
HHI segment
|
|
$
|
39.5
|
|
|
|
51.2
|
|
Metaldyne segment
|
|
|
50.3
|
|
|
|
48.5
|
|
Grede segment
|
|
|
23.7
|
|
|
|
29.1
|
|
Total
|
|
$
|
113.5
|
|
|
|
128.8
|
|
The following table sets forth the reconciliation between Adjusted EBITDA and income before tax, the most directly comparable GAAP measure:
|
|
Quarter Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
Income before tax
|
|
$
|
22.5
|
|
|
|
37.1
|
|
Interest expense, net
|
|
|
25.7
|
|
|
|
26.0
|
|
Depreciation and amortization
|
|
|
55.0
|
|
|
|
56.9
|
|
Loss (gain) on foreign currency
|
|
|
2.6
|
|
|
|
(2.8
|
)
|
Loss on fixed assets
|
|
|
1.4
|
|
|
|
1.5
|
|
Stock-based compensation
|
|
|
4.4
|
|
|
|
7.9
|
|
Non-recurring acquisition and purchase accounting items
|
|
|
(1.4
|
)
|
|
|
1.3
|
|
Non-recurring operational items
|
|
|
3.3
|
|
|
|
0.9
|
|
Adjusted EBITDA
|
|
$
|
113.5
|
|
|
|
128.8
|
|
EBITDA is calculated as net income before interest expense, income tax expense (benefit) and depreciation and amortization. Adjusted EBITDA is calculated as EBITDA adjusted for:
|
•
|
(gain) loss on foreign currency;
|
|
•
|
(gain) loss on fixed assets;
|
|
•
|
debt transaction expenses;
|
|
•
|
stock-based compensation;
|
|
•
|
non-recurring acquisition related items; and
|
|
•
|
non-recurring operational items.
|
Included within non-recurring operational items are impairment charges and exit costs associated with the closures of Grede’s Berlin, Wisconsin, and Bessemer, Alabama facilities.
Adjusted EBITDA eliminates the effects of items that we do not consider indicative of our core operating performance. Adjusted EBITDA is a supplemental measure of operating performance that does not represent and should not be considered as alternatives to net income, as determined under GAAP, and our calculation of Adjusted EBITDA may not be comparable to those reported by other companies.
Management believes the inclusion of the adjustments to Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future. By providing this non-GAAP financial measure, together with reconciliation to GAAP results, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives. We believe Adjusted EBITDA is used by investors as a supplemental measure to evaluate the overall operating performance of companies in our industry.
27
Management uses Adjusted EBITDA or comparable metrics:
|
•
|
as a measurement used in comparing our operating performance on a consistent basis;
|
|
•
|
to calculate incentive compensation for our employees;
|
|
•
|
for planning purposes, including the preparation of our internal annual operating budget;
|
|
•
|
to evaluate the performance and effectiveness of our operational strategies; and
|
|
•
|
to assess compliance with various metrics associated with our agreements governing our indebtedness.
|
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of the limitations are:
|
•
|
Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
|
|
•
|
Adjusted EBITDA does not reflect all GAAP non-cash and non-recurring adjustments;
|
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacements;
|
|
•
|
Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes; and
|
|
•
|
Adjusted EBITDA does not reflect the non-cash component of employee compensation.
|
To address these limitations, we reconcile Adjusted EBITDA to the most directly comparable GAAP measure, income before tax. Further, we also review GAAP measures and evaluate individual measures that are not included in Adjusted EBITDA.
Nine Months Ended October 2, 2016 compared to Nine Months Ended September 27, 2015
The following table sets forth our statement of operations for the periods presented.
|
|
Nine Months Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
Net sales
|
|
$
|
2,144.1
|
|
|
|
2,312.0
|
|
Cost of sales
|
|
|
1,770.9
|
|
|
|
1,915.2
|
|
Gross profit
|
|
|
373.2
|
|
|
|
396.8
|
|
Selling, general and administrative expenses
|
|
|
177.0
|
|
|
|
178.8
|
|
Operating income
|
|
|
196.2
|
|
|
|
218.0
|
|
Interest expense, net
|
|
|
78.1
|
|
|
|
80.5
|
|
Loss on debt extinguishment
|
|
|
—
|
|
|
|
0.4
|
|
Other, net
|
|
|
10.7
|
|
|
|
(8.2
|
)
|
Income before taxes
|
|
|
107.4
|
|
|
|
145.3
|
|
Income tax provision
|
|
|
27.3
|
|
|
|
40.3
|
|
Net income
|
|
|
80.1
|
|
|
|
105.0
|
|
Income attributable to noncontrolling interests
|
|
|
0.4
|
|
|
|
0.3
|
|
Net income attributable to stockholders
|
|
$
|
79.7
|
|
|
|
104.7
|
|
Net Sales
Net sales were $2,144.1 million for the nine months ended October 2, 2016, as compared to $2,312.0 million for the nine months ended September 27, 2015, a decrease of $167.9 million. The decrease was primarily driven by a decrease in industrial and commercial sales of approximately $76 million, the scheduled attrition of wheel bearing programs of $58 million, the impact of lower raw material surcharge pass-through of approximately $58 million, net price decreases of approximately $18 million, and unfavorable foreign currency movements of approximately $4 million, partially offset by an increase of $52 million from increased light vehicle volumes and approximately $4 million of additional sales due to the Brillion Acquisition in September 2016.
28
The following table sets forth our net sales by segment for the nine months ended October 2, 2016 and September 27, 2015:
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
Increase
(Decrease)
|
|
|
Percent
Change
|
|
|
|
(In millions)
|
|
|
|
|
|
HHI segment
|
|
$
|
645.4
|
|
|
|
750.1
|
|
|
|
(104.7
|
)
|
|
|
(14.0
|
)%
|
Metaldyne segment
|
|
|
903.2
|
|
|
|
860.8
|
|
|
|
42.4
|
|
|
|
4.9
|
%
|
Grede segment
|
|
|
595.5
|
|
|
|
701.1
|
|
|
|
(105.6
|
)
|
|
|
(15.1
|
)%
|
Total
|
|
$
|
2,144.1
|
|
|
|
2,312.0
|
|
|
|
(167.9
|
)
|
|
|
|
|
The decrease in HHI net sales was primarily attributable to scheduled attrition of wheel bearing programs of approximately $58 million, lower raw material surcharge pass-through of approximately $26 million, and net price decreases of approximately $10 million and lower light vehicle volumes on certain platforms.
The increase in Metaldyne net sales was primarily attributable to increased light vehicle volumes of approximately $60 million, partially offset by lower raw material surcharge pass-through of approximately $9 million, unfavorable foreign currency movements of approximately $4 million, and net price decreases of approximately $5 million.
The decrease in Grede net sales was primarily attributable to the decrease in industrial and commercial volumes of approximately $76 million, lower raw material surcharge pass-through of approximately $23 million, and net price reductions of approximately $3 million and lower light vehicle volumes, partially offset by approximately $4 million of additional sales from the Brillion Acquisition in September 2016.
Cost of Sales
Cost of sales was $1,770.9 million for the nine months ended October 2, 2016, as compared to $1,915.2 million for the nine months ended September 27, 2015, a decrease of $144.3 million. This decrease was primarily driven by lower raw material surcharge costs of approximately $65 million, lower manufacturing costs from the scheduled attrition of wheel bearing programs of approximately $30 million, lower costs due to foreign currency exchange of approximately $7 million, net manufacturing cost reductions, lower depreciation, and lower industrial and commercial volumes, partially offset by increased costs from higher light vehicle volumes.
The following table sets forth our cost of sales by segment for the nine months ended October 2, 2016 and September 27, 2015:
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
Increase
(Decrease)
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
HHI segment
|
|
$
|
535.4
|
|
|
|
609.9
|
|
|
|
(74.5
|
)
|
|
|
(12.2
|
)%
|
Metaldyne segment
|
|
|
737.1
|
|
|
|
720.9
|
|
|
|
16.2
|
|
|
|
2.2
|
%
|
Grede segment
|
|
|
498.4
|
|
|
|
584.4
|
|
|
|
(86.0
|
)
|
|
|
(14.7
|
)%
|
Total
|
|
$
|
1,770.9
|
|
|
|
1,915.2
|
|
|
|
(144.3
|
)
|
|
|
|
|
The decrease in HHI cost of sales was primarily due to lower raw material surcharge costs of approximately $34 million the scheduled attrition of wheel bearing programs, partially offset by higher net manufacturing costs due to unfavorable product mix.
The increase in Metaldyne cost of sales was primarily attributable to increased volumes of approximately $38 million, partially offset by lower raw material surcharge costs of approximately $8 million, favorable foreign currency movements of approximately $7 million, and net manufacturing cost reductions.
The decrease in Grede cost of sales was primarily attributable to lower volumes of approximately $51 million, lower raw material surcharge costs of approximately $23 million, and net manufacturing cost reductions.
Gross Profit
Gross profit was $373.2 million for the nine months ended October 2, 2016, as compared to $396.8 million for the nine months ended September 27, 2015, a decrease of $23.6 million. The decrease was primarily driven by the factors discussed above.
29
The follo
wing table sets forth our gross profit by segment for the nine months ended October 2, 2016 and September 27, 2015:
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
Increase
(Decrease)
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
HHI segment
|
|
$
|
110.0
|
|
|
|
140.2
|
|
|
|
(30.2
|
)
|
|
|
(21.5
|
)%
|
Metaldyne segment
|
|
|
166.1
|
|
|
|
139.9
|
|
|
|
26.2
|
|
|
|
18.7
|
%
|
Grede segment
|
|
|
97.1
|
|
|
|
116.7
|
|
|
|
(19.6
|
)
|
|
|
(16.8
|
)%
|
Total
|
|
$
|
373.2
|
|
|
|
396.8
|
|
|
|
(23.6
|
)
|
|
|
|
|
Operating Income
Operating income was $196.2 million for the nine months ended October 2, 2016, as compared to $218.0 million for the nine months ended September 27, 2015, a decrease of $21.8 million. This decrease was primarily driven by the impact of lower gross profit of $23.6 million described above, partially offset by a $1.8 million decrease in selling, general, and administrative expenses. The decrease in selling, general, and administrative expenses was primarily due to lower stock compensation expense.
The following table sets forth our operating income by segment for the nine months ended October 2, 2016 and September 27, 2015:
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
Increase
(Decrease)
|
|
|
Percent
Change
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
HHI segment
|
|
$
|
61.3
|
|
|
|
89.4
|
|
|
|
(28.1
|
)
|
|
|
(31.4
|
)%
|
Metaldyne segment
|
|
|
110.4
|
|
|
|
87.4
|
|
|
|
23.0
|
|
|
|
26.3
|
%
|
Grede segment
|
|
|
24.5
|
|
|
|
41.2
|
|
|
|
(16.7
|
)
|
|
|
(40.5
|
)%
|
Total
|
|
$
|
196.2
|
|
|
|
218.0
|
|
|
|
(21.8
|
)
|
|
|
|
|
The decrease in HHI operating income was primarily attributable to the decrease in gross profit.
The increase in Metaldyne operating income was primarily attributable to the increase in gross profit, partially offset by higher wages and benefits in selling, general, and administrative expenses
which were driven by added engineering and management positions associated with new product launches and plant expansions
.
The decrease in Grede operating income was primarily attributable to the decrease in gross profit, partially offset by lower selling, general and administrative expenses.
Interest Expense, Net
Interest expense, net was $78.1 million for the nine months ended October 2, 2016, as compared to $80.5 million for the nine months ended September 27, 2015, a decrease of $2.4 million. The decrease in interest expense, net reflected lower average outstanding borrowings due to the pay down of long-term debt and lower average interest rates due to the re-pricing of our term loan debt in May 2015.
Other, Net
Other, net reflected a loss of $10.7 million for the nine months ended October 2, 2016, as compared to income of $8.2 million for the nine months ended September 27, 2015, an unfavorable change of $18.9 million. The change in other, net compared to the prior period was primarily due to a $19.8 million unfavorable change in gain or loss on foreign currency transactions. Approximately $11.1 million of the $19.8 million unfavorable change was attributable to the remeasurement of our Euro denominated Euro Term Loan.
Income Taxes
The income tax provision for the nine months ended October 2, 2016 and September 27, 2015 was $27.3 million and $40.3 million, respectively. The $13.0 million decrease was primarily attributable to a reduction in income before tax and a favorable
30
geographic income mix in 2016 as compared to 2015, partially offset by discrete tax items. Income tax expense for the nine months ended October 2, 2016 includes
a discrete net tax benefit of $2.4 million, primarily related to a favorable court ruling in Spain. Income tax expense for the nine months ended September 27, 2015 includes a discrete net tax benefit of $4.1 million, primarily relating to the enactment of
Senate Bill 441 in the state of Indiana, eliminating the throwback rule for calculating state income tax expense. Our effective tax rate for the nine months ended October 2, 2016 and September 27, 2015 was 25.4% and 27.7%, respectively.
Net Income Attributable to Stockholders
Net income attributable to stockholders was $79.7 million, or 3.7% of net sales for the nine months ended October 2, 2016, as compared to $104.7 million, or 4.5% of net sales for the nine months ended September 27, 2015, a decrease of $25.0 million. The decrease was primarily attributable to the factors discussed above.
Adjusted EBITDA
Management’s assessment of performance includes an evaluation of Adjusted EBITDA. The following table sets forth Adjusted EBITDA by segment.
|
|
Nine Months Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
HHI segment
|
|
$
|
126.3
|
|
|
|
157.3
|
|
Metaldyne segment
|
|
|
172.3
|
|
|
|
152.0
|
|
Grede segment
|
|
|
87.8
|
|
|
|
105.7
|
|
Total
|
|
$
|
386.4
|
|
|
|
415.0
|
|
The following table sets forth the reconciliation between Adjusted EBITDA and income before tax, the most directly comparable GAAP measure:
|
|
Nine Months Ended
|
|
|
|
October 2, 2016
|
|
|
September 27, 2015
|
|
|
|
(In millions)
|
|
Income before tax
|
|
$
|
107.4
|
|
|
|
145.3
|
|
Interest expense, net
|
|
|
78.1
|
|
|
|
80.5
|
|
Depreciation and amortization
|
|
|
165.6
|
|
|
|
172.1
|
|
Loss (gain) on foreign currency
|
|
|
8.8
|
|
|
|
(11.7
|
)
|
Loss on fixed assets
|
|
|
2.6
|
|
|
|
1.9
|
|
Loss on debt extinguishment
|
|
|
—
|
|
|
|
0.4
|
|
Debt transaction expenses
|
|
|
—
|
|
|
|
1.7
|
|
Stock-based compensation
|
|
|
12.6
|
|
|
|
15.4
|
|
Non-recurring acquisition and purchase accounting items
|
|
|
2.0
|
|
|
|
1.4
|
|
Non-recurring operational items
|
|
|
9.3
|
|
|
|
8.0
|
|
Adjusted EBITDA
|
|
$
|
386.4
|
|
|
|
415.0
|
|
Liquidity and Capital Resources
As of October 2, 2016, we had cash and cash equivalents of $151.1 million and total indebtedness, inclusive of capitalized lease obligations, of $1,863.7 million. We also have access to additional liquidity pursuant to the terms of our revolving credit facility. As of October 2, 2016, $236.8 million was available on our revolving credit facility after giving effect to letters of credit of $13.2 million.
31
During the nine months en
ded October 2, 2016, our board of directors declared and the Company paid the following dividends on shares of our common stock outstanding:
Date Declared
|
|
Date Paid
|
|
Dividend Per Share
|
|
|
|
|
|
|
|
|
February 24, 2016
|
|
April 26, 2016
|
|
$
|
0.0900
|
|
May 4, 2016
|
|
June 21, 2016
|
|
|
0.0925
|
|
August 3, 2016
|
|
September 20, 2016
|
|
|
0.0925
|
|
On November 2, 2016, our board of directors declared a dividend of $0.0925 per share of common stock outstanding, payable on December 9, 2016 to stockholders of record as of November 18, 2016.
On February 24, 2016, our board of directors authorized a share repurchase program (the “Share Repurchase Program”). The Share Repurchase Program, as amended on August 3, 2016, authorizes the Company to purchase shares of its common stock for an aggregate repurchase price not to exceed $35.0 million. Subject to applicable rules and regulations, the shares may be repurchased through open market purchases, privately negotiated transactions, or otherwise. The Share Repurchase Program expires in February 2017, and may be terminated or amended by the Company’s board of directors in its discretion at any time. As of October 2, 2016, the Company has repurchased 1,659,804 shares of its common stock at an average price per share of $15.55.
On November 3, 2016 the Company suspended its Share Repurchase Program. As of November 3, 2016, cumulative shares repurchased totaled 1,898,261 shares at an average purchase price per share of $15.56.
On August 3, 2016, our board of directors approved a debt reduction plan, authorizing the Company to retire or purchase up to $10 million of outstanding debt, including the USD Term Loan, Euro Term Loan or Registered Notes, in open market purchases, privately negotiated transactions, or otherwise. Such purchase, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions, and other factors.
The Company has been assigned the following credit ratings and outlook by Moody’s Investors Service (“Moody’s”) and Standard & Poor’s Rating Services (“S&P”):
|
|
Moody’s
|
|
S&P
|
Corporate
|
|
B1
|
|
BB-
|
Revolving credit facility
|
|
Ba3
|
|
BB+
|
Term loan facility
|
|
Ba3
|
|
BB+
|
Senior Notes
|
|
B3
|
|
B+
|
Outlook
|
|
Stable
|
|
Stable
|
As of October 2, 2016, $103.3 million of cash and cash equivalents were held by certain foreign subsidiaries whose earnings are reinvested indefinitely. We make this assertion based on the operational and investing needs of the foreign locations and our ability to fund our U.S. operations and obligations from domestic cash flow and capital resources. Based on this assertion, no provision has been made for U.S. income taxes, which would be assessed upon repatriation of the foreign earnings.